B1.436 General principles
If the persons carrying on a trade do so in such a way that they and the customers are the same persons, no profits or gains are yielded by the trade for tax purposes and therefore no assessment in respect of the trade can be made1.
Any surplus resulting from this form of trading represents only the extent to which the contributions of the participators have proved to be in excess of requirements. Such a surplus is regarded as their own money and returnable to them. In order that this exempting element of mutuality should exist, it is essential that the profits should be capable of coming back at some time and in some form to the persons to whom the goods were sold or the services were rendered.
Under ITTOIA 2005, s 104 and CTA 2009, s 101, however, on the liquidation of a body corporate which carried on mutual business, distributions of surpluses from payments to the body, which were allowed as deductible expenses of the payer's trade, are treated as trading receipts. This is a necessary provision as a mutual society might otherwise be used as a tax-free reservoir for profits derived from outside persons. An example being where the first member of the society is a company owned by the other members and is selling wholesale goods at cost to the society, for purchase by the other members at near retail price (for onward sale by them to the public at a