Clubs, societies and other unincorporated associations count as companies for corporation tax, so their taxable income and gains are charged to corporation tax rather than income tax. A genuine members’ club is not taxed on the surplus it makes from its own members, but income from visitors and other non members, bank interest and chargeable gains are taxable. HMRC may treat a small club as dormant, with no returns, where its annual corporation tax is not expected to exceed £100 and it is run exclusively for its members.

Why does a club pay corporation tax rather than income tax?

Section 1121 of the Corporation Tax Act 2010 defines “company” as any body corporate or unincorporated association, other than a partnership, a local authority or a local authority association. HMRC’s Company Taxation Manual at CTM41305 explains that this brings in unincorporated organisations of all kinds that have an identifiable membership bound together by a constitution or rules, written or oral, and an existence distinct from the individual members. Whether a body is an unincorporated association is a question of fact; what it calls itself does not decide it.

CTM41310 lists members’ clubs, investment clubs, thrift funds and Christmas or holiday clubs, voluntary organisations and religious communities as examples. Clubs incorporated as companies limited by guarantee or as registered societies (such as many working men’s clubs, see CTM40110) are also within corporation tax, and the members’ club principles below can still apply to them. Registered charities have their own exemptions and are not covered here.

What does mutual trading mean for a members’ club?

HMRC’s Business Income Manual at BIM24200 says the first question is whether the club trades at all. When members come together to provide facilities for themselves, their activities do not normally amount to a trade because they lack commerciality, and if there is no trade there can be no taxable trading profit. Where there is a trade, surplus from transactions with members can still be exempt under the mutuality principle.

CTM40105 summarises the position: a club established by its members for their own social or recreational objects is not taxed on surpluses from transactions with its full members, on the authority of Carlisle and Silloth Golf Club v Smith and NALGO v Watkins. BIM24210 adds that you cannot isolate one facility, such as the bar, and call it a trade with members. The protection does not extend to a proprietary club owned by someone other than the general membership; that owner’s profit from members is taxable.

For mutuality to apply, the Tax Bulletin article reproduced at BIM24215 requires a class of contributors who, as a class, are entitled to share in the surplus, including on a winding up. For an unincorporated club, general law may give members that right even if the rules are silent; for a club company the entitlement must be explicit. BIM24005 adds that there is no relief for losses on mutual trading and no capital allowances for spending on the mutual trade.

Which club income is taxable?

  • Visitors and temporary members. BIM24220 treats commercial fees from visitors, casual users, booked groups and temporary members (for example holiday package golf) as trading receipts. Fees for a member’s personal guest, where the member bears the cost, normally create no liability.
  • Associate and junior members. Associate members’ payments are trading income unless their rights are equivalent to full members’. Lower junior subscriptions can be accepted as non trading if they are not intended to subsidise full members (BIM24220).
  • Bar, catering and match receipts. BIM24215 says these are normally trading income to be split between members and non members. Television fees and sponsorship are wholly non mutual, and a franchise fee from an outside caterer is wholly trading income.
  • Investment income and gains. BIM24305 confirms a members’ club is taxable on savings and investment income it receives, and CTM40105 says its other income and gains are chargeable in the normal way. Selling a clubhouse or playing field at a gain is therefore within corporation tax.

Expenses must be apportioned on a reasonable basis between taxable and non taxable activity, for example by the share of income or, for a golf club, the proportion of rounds played by paying visitors (BIM24215). If the club pays yearly interest on a brewery loan, BIM24305 notes it may need to deduct income tax under sections 945 to 960 of the Income Tax Act 2007.

Does a club have to register and file returns?

Paragraph 2 of Schedule 18 to the Finance Act 1998 requires a company that is chargeable for an accounting period and has not received a notice to file to notify HMRC within twelve months from the end of that period. HMRC’s guidance on trading and non trading says unincorporated clubs, societies and associations that become active must tell HMRC in writing at the Corporation Tax Services address. The separate three month notification rule in section 55 of the Finance Act 2004 applies only to incorporated companies, not to members’ clubs (COM1040). Late notification can lead to failure to notify penalties.

Once HMRC issues a notice to deliver, COM23110 confirms there is no minimum liability below which a return is not needed. The return must be filed online and tax paid electronically. A club may send its accounts in either iXBRL or PDF, but computations must be in iXBRL; see iXBRL tagging for company tax returns.

When will HMRC treat a small club as dormant?

As a matter of departmental policy set out in COM23110 and in HMRC’s published guidance, HMRC may treat a club or unincorporated organisation as dormant for corporation tax, even though it is active, if its annual corporation tax liability is not expected to exceed £100 and it is run exclusively for the benefit of its members. For each year of dormancy the club must not have trading losses it wants to claim relief for, assets it is likely to sell at a chargeable gain, or interest or annual payments from which tax must be deducted and paid to HMRC.

The treatment is not available to a privately owned club run commercially for personal profit, a housing association or registered social landlord, a trade association, a thrift fund, a holiday club, a mutual insurance arrangement, a friendly society or a company owned by a charity. HMRC writes to the treasurer (COM23110 refers to form CTS150) and need not ask for a return for up to five years, provided the rules, financial control and profit level stay the same, no significant asset is sold and the liability stays at or below £100. HMRC’s letter warns that penalties may be due if the club does not report a change, and that PAYE and National Insurance may still apply.

Dormancy here is an HMRC practice for corporation tax only. Unless HMRC has agreed it, a club that has received a notice must still file, and HMRC’s guidance warns that penalties can follow if it does not. Block management companies have a parallel but different regime; see tax for residents’ management companies.

How does the calculation work for a typical club?

Illustration only. A tennis club run by its members receives £30,000 of full member subscriptions, £2,000 of court fees from paying visitors and £300 of bank interest. It spends £800 of costs that can reasonably be attributed to visitor use.

  • Subscriptions: not taxable, because they come from members within the circle of mutuality.
  • Visitor fees: £2,000 less £800 = £1,200 taxable trading profit.
  • Bank interest: £300 taxable.
  • Total taxable profits: £1,500. HMRC’s rates page gives a small profits rate of 19% where profits are £50,000 or less, so tax is £285.

Because £285 is more than £100, the club does not fit the dormancy practice and must file returns. If it stopped admitting paying visitors and had only the £300 of interest, tax would be £57 and it could ask HMRC to consider dormant treatment.

What mistakes do club treasurers make?

  • Treating all bar takings as exempt when non members also buy drinks.
  • Forgetting bank interest because the subscriptions are not taxable.
  • Selling a clubhouse or other valuable asset while treated as dormant without telling HMRC.
  • Assuming the club is too small to be within corporation tax, rather than asking HMRC to apply the £100 practice.
  • Sending PDF computations, which HMRC will not accept even where PDF accounts are allowed.
  • Calling a commercial operation a members’ club; badges of trade and ownership decide the position, not the name. For general rules see corporation tax explained.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.