Commentary

B1.437 Mutual trading by companies

Business tax
Business tax | Commentary

B1.437 Mutual trading by companies

Business tax | Commentary

B1.437 Mutual trading by companies

The mere fact that a mutual concern is incorporated as a company does not destroy the element of mutuality1, and consequential non-liability to tax.

This principle was established in Jones v South-West Lancashire Coal Owners' Association Ltd2. The association was incorporated under the Companies Acts and was limited by guarantee. Its purpose was the indemnifying of only its members (who were all coal owners) against liability for workmen's compensation. The association's funds were built up from contributions by the members in proportion to the wages they paid. Calls were made upon the members for the payment of the company's liabilities for compensation and other expenses, and these calls formed a general fund.

Each year the surplus in that fund was transferred to a reserve fund to which extraordinary calls upon the members were also credited. The reserve fund was deemed to belong to the members in the proportions of their respective contributions and the share of a member was returnable to him on his retirement from membership or on the winding up of the company3. A member remained liable for claims which had accrued before he retired.

It was held that the surplus

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