The essential features for a trade to be mutual trading are set
out at
BIM24020. There is no relaxation of
these criteria in the case of mutual health Insurers. You should
apply the tests in exactly the same way as you would to an entity
carrying on any other activity. In particular you should ensure
that any surplus must go back to the contributors
and to no one else - see however
BIM24675.
The larger funds tend to be companies limited by guarantee.
The presence of a share capital does not, of itself, preclude a
finding of mutual trading but it can cause considerable
difficulties for the would-be mutual trader - see
BIM24405.
The constitutions of a number of mutual health insurers meant
that they could not be carrying on a mutual trade. Principally this
was because of rules that precluded the contributors from
controlling the insurer. Following discussions with the British
Health Care Association (the body representing the majority of the
Insurers involved), it was agreed, that those mutual health
insurers (who had hitherto been treated as mutual traders but whose
rules on examination were found to be inconsistent with such
treatment) could either:
You should not seek to apply a change retrospectively or re-open
‘closed’ years. You should also allow the changeover to
take place from a convenient date; for example the beginning of the
insurer’s next accounting period.
A health insurer who adopted the first alternative above may
at a future date (and for commercial reasons) wish to amend their
constitution/rules to conform to the requirements for mutual
trading. Where there are sound reasons for so doing the change may
be accepted without further enquiry. Any case where the change
appears to be designed to secure a tax advantage should be
critically examined.
