»Ê¹ÚÌåÓýapp

»Ê¹ÚÌåÓýapp case of Ayrshire Employersâ€� Mutual Insurance Association Ltd v CIR (1946) 27TC331, confirmed that no tax had to be paid on surpluses from mutual trading. This is as a result of the principle that ‘a man cannot trade with himselfâ€�. If a group of people join together for a common purpose their transactions with the umbrella body can be seen as mutual if

• the body’s legal framework passes the tests for mutuality, and
• its transactions are with customers who are also members and accord with its legal framework.

If a body is incorporated, its legal framework will be set out in its constitutional documents (articles). If not incorporated, in rules or whatever instrument sets out its constitution. »Ê¹ÚÌåÓýappre may also be agreements, contracts for services for example, which deal with transactions between the body and its members.

»Ê¹ÚÌåÓýapp bodies are only free from tax on their trading activities. »Ê¹ÚÌåÓýappy remain taxable on all other income and gains, including income from property or bank interest, without relief for management expenses.

»Ê¹ÚÌåÓýappre is no relief for losses made on mutual trading, and no capital allowances available on capital expenditure.

Insurance companies are dealt with at CTM40600.