Corporation Tax Act 2010

Companies carrying on a mutual business

1070 Companies carrying on a mutual business

(1) Subsection (2) applies if a company carries on a business (“the mutual business”) of—

(a) mutual trading,

(b) mutual insurance, or

(c) other mutual business.

(2) The provisions of the Corporation Tax Acts relating to distributions apply to relevant distributions made by the company only so far as they are made out of—

(a) profits of the company which are brought into charge to corporation tax, or

(b) franked investment income.

This is subject to subsection (4).

(3) In subsection (2) “relevant distributions” means distributions which—

(a) are made to persons participating in the mutual activities of the mutual business, and

(b) derive from those activities.

(4) If a company carries on a mutual life assurance business, the provisions of the Corporation Tax Acts relating to distributions do not apply to distributions made by the company which—

(a) are made to persons participating in the mutual activities of the business, and

(b) derive from those activities.

(5) Subject to subsections (1) to (4), the fact that—

(a) a distribution made by a company carrying on a mutual business is derived from the mutual activities of that business, and

(b) the recipient is a company participating in those activities,

does not affect the character that the payment or other receipt has for the purposes of corporation tax or income tax in the hands of the recipient.

(6) In subsection (2) “profits” means income and chargeable gains.