Income Tax (Trading and Other Income) Act 2005 section 104

Distribution of assets of mutual concerns

Section 104 deals with the tax treatment of distributions received by traders from mutual concerns (such as mutual insurers or co-operatives) that are being wound up or dissolved.

• Where a trader previously claimed a deduction for payments to a mutual concern and that concern is wound up or dissolved, any distribution received from the concern's mutual business profits is taxable
• If the trader is still trading when the distribution is received, it is treated as a trading receipt; if the trade has already ceased, it is treated as a post-cessation receipt
• Distributions include direct shares of the concern's assets, consideration received in amalgamation or reconstruction schemes, and proceeds from transferring or surrendering the right to receive such distributions
• Where a right to receive a distribution is transferred other than at arm's length, the person making the transfer is treated as having received consideration equal to the market value of that right