Section 104 | Distribution of assets of mutual concerns

(1)This section applies if—

(a)a deduction has been allowed in calculating the profits of a trade for a payment to a mutual concern for the purposes of its mutual business,

(b)the concern is being or has been wound up or dissolved,

(c)a person (“the recipient”) who is carrying on the trade, or was doing so at the time of the payment, receives money or money's worth representing the concern's assets, and

(d)the assets in question represent profits of the mutual business conducted by the concern.

(2)If the recipient is carrying on the trade at the time the money or money's worth is received, the amount or value of the money or money's worth is brought into account as a receipt in calculating the profits of the trade.

(3)If the recipient—

(a)is not carrying on the trade at the time the money or money's worth is received, but

(b)was doing so at the time of the payment to the mutual concern,

the amount or value of the money or money's worth is treated as a post-cessation receipt (see Chapter 18).

(4)For the purposes of this section money or money's worth represents assets of a mutual concern if it—

(a)forms part of the assets of the concern,

(b)forms part of the consideration for the transfer of the assets of the concern as part of a scheme of amalgamation or reconstruction which involves its winding up, or

(c)consists of the consideration for a transfer or surrender of a right to receive anything falling within paragraph (a) or (b) and does not give rise to a charge to income tax on the person receiving it otherwise than as a result of this section.

(5)If a transfer or surrender of a right to receive anything which—

(a)forms part of the assets of a mutual concern, or

(b)forms part of the consideration for the transfer of the assets of a mutual concern,

is not at arm's length, the person making the transfer or surrender is treated as receiving consideration equal to the value of the right.

(6)In this section references to a mutual concern are to a body corporate which has at any time carried on a trade which consists of or includes the conduct of mutual business (whether or not confined to the members of the body corporate).

(7)For the purposes of this section a trade does not consist of or include the conduct of mutual business if all the profits of the trade are chargeable to income or corporation tax.