BIM24480 - Mutual trading: allocation of Income: introduction

Introduction and layout of guidance

A mutual trader often has income from outside the ‘circle of mutuality’. Where such income arises from the carrying on of a trade it is taxable under Case I of Schedule D.

The following paragraphs provide guidance on how to allocate the income received by the mutual trader between:

• non-taxable dealings with contributors, and
• taxable dealings with non-contributors.

There are some categories of trading income (for example television or sponsorship income) that derive entirely from non-contributors. There are some receipts that derive entirely from contributors (for example income from a members’ only facility). And there are some receipts that derive partly from contributors and from non-contributors - for example takings from a facility available both to members and non-members.

You will need to establish the underlying facts to allow an allocation of income between taxable (non-mutual) and non-taxable (mutual). Under no circumstances can losses relating to the mutual trade be set against profits derived from the non-mutual trade.

The following guidance covers: