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Where Taxpayers and Advisers Meet

Social Club - Members distribution

Milbo
Posts: 45
Joined: Wed Aug 06, 2008 4:07 pm

Social Club - Members distribution

Postby Milbo » Fri Jun 22, 2018 1:27 pm

Your assistance would be appreciated if possible.

I have an unincorporated, members only, social club (not CASC) which is set to close following the aceptance of an offer to buy the land and premises.

The social club is a mutual trading organisation to which the members pay an annual subscription. The social club receives rental income which is the only income subject to Corporation Tax.

The disposal of the land will produce a substantial Capital Gain on which, presumably, Corporation Tax will be payable. Thereafter, the funds will be distributed to the members in varying amounts depending on how long they have been members. The maximum amount a member will receive will be £9,000 and the minimum £2,000.

My question is how will the distributions (assuming that thre is no mutual trading surplus included) be taxed in the hands of the members.

Many thanks in advance.

pawncob
Posts: 4352
Joined: Wed Aug 06, 2008 4:06 pm
Location: West Sussex

Re: Social Club - Members distribution

Postby pawncob » Fri Jun 22, 2018 4:23 pm

This article helps:
http://www.thegolfbusiness.co.uk/2012/03/will-members-receive-a-windfall-if-they-sell-their-club/

but isn't definitive as HMRCs guidance contradicts him:https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm15540

CTA10/S1030 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’.

The demutualisation of the building societies resulted in windfalls taxable on the individual recipients.
With a pinch of salt take what I say, but don't exceed your RDA


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