CTM15540 - Distributions: general: unincorporated associations
The term ‘unincorporated association’ is not defined in the Taxes Acts and since an unincorporated association is not a legal person there is no definition in other statute law.
The term company in ICTA88/S209 includes an unincorporated association, such as a club. This is because ICTA88/S832 (1) says that the word ‘company’ means any body corporate or unincorporated association but does not include a partnership, local authority or local authority association. ‘Share’ includes any interest of a member in a company (see CTM15130). It is possible for an unincorporated association to make a distribution ‘in respect of shares’ within ICTA88/S209 (2)(b). Similarly, a transfer of assets by an unincorporated association to its members at less than market value could be within ICTA88/S209 (4).
However, it is unusual for an unincorporated association to make a distribution.
ICTA88/S209 (1) excludes distributions in respect of share capital in a winding-up from the distributions legislation. However, the dissolution of an unincorporated association is not normally considered to constitute a winding-up, and distributions out of the assets of an unincorporated association are not normally viewed as ‘distributions in respect of share capital’.
An exception to this is the winding-up of a ‘co-partnery’ established by Deed of Settlement. This kind of association pre-dates modern company law, and is an unincorporated association with share capital.
You should also consider whether ESCC15 applies. This provides that if:
- substantially the whole of an association's activities are of a social or recreational nature,
and
- it has not carried on an investment business or trade, other than a mutual trade,
and
- the amount distributed to each member is not large (that is, not more than £2,000 per member),
the company is given the option of not having ICTA88/S209 apply.
If the company takes this option, all the amounts distributed will be treated as capital receipts of the members. Such receipts will be taken into account in computing any capital gains liability on the members.
You should not apply the concession to any case involving sums materially over £2,000 per member.
You should also consider whether ICTA88/S490 may apply (see CTM15550).
