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HMRC internal manual

Company Taxation Manual

Particular bodies: unincorporated associations: cessation

CTA10/S1030 (formerly the final words of ICTA88/S209 (1): distributions in a winding-up) does not apply to the dissolution of most unincorporated associations because these have no share capital or anything analogous to it.  One historical exception to this was the deed of settlement company, see CTM41320, which had a share capital but was unincorporated.  The joint capital stock was held in trust in members’ shares.  Such companies were superseded when incorporation by registration was introduced in the 1844 Companies Act.

Concession ESCC15 (see CTM15540)

may apply if

  • substantially the whole of an association’s activities have been of a social or recreational nature,
  • it has not carried on an investment business or a trade other than a mutual trade, and
  • the amount distributed to each member is not large (£2000 or less, as a guide).

The association is then given the usual option (as with CTA10/S1030A, and before that ESCC16) of not having CT distribution treatment applied and of having the whole of the amounts distributed treated as capital receipts of the members for the purpose of calculating any chargeable gains arising to them on the disposal of their individual interests in the association. CTA10/S1117 (1) specifically provides that a member’s interest in an association is to be regarded as a ‘share’, so that distributions of the assets are qualifying distributions. The amount would, however, be limited by CTA10/S1071 to distributions made out of profits brought into CT charge or out of franked investment income.

The dissolution of an unincorporated association is not considered to constitute a ‘winding up’ as such, as this is a prescribed legal process.