Chapter BIM24210
| Published date | 22 November 2013 |
| Record Number | BIM24210 |
| Court | HM Revenue & Customs |
| Issuer | HM Revenue & Customs |
Where the club is a proprietary club, that is the ownership of the club rests other than with the general membership, the profit earned from providing goods or services to its members is not exempt from tax under the rule mentioned in the first paragraph of BIM24205.
Members’ clubsA members’ club is one where ownership of the club and its assets rests with the general membership who control the club and its dealings. Such control may be exercised through an elected committee.
The case of CIR v The Eccentric Club Ltd [1925] 12TC669 extended the doctrine that there is no trading in a social context to the activities of a body corporate incorporated for the purpose of operating a members’ club. The club was a company limited by guarantee. The club was formed to provide a social club and refreshment for payment for members. The club was purely a members’ club and the members of the club and the members of the company were identical. No non-members were admitted.
Warrington L J said that the company did not carry on a business with a view to profit as an ordinary commercial concern. In substance the company was an ordinary members’ club not a proprietary club. Warrington L J highlighted the distinction between a proprietary club and a members’ club when he said, at page 696 of 12TC:
‘The club proprietor, whether an individual or a company, carries on a business with a view to profit as an ordinary commercial concern…the Company in the present case is a convenient instrument or medium for enabling the members to conduct a social club the objects of which are immune from every taint of commerciality…What is in fact being carried on, putting technicalities aside, is a members’ club and not a proprietary club,…’
Warrington L J draws a clear distinction between a members’ club and a proprietary club. The Judge’s comments are simply an extension of the kitty example in BIM24020.
Sargent L J took the same line. In substance this was an ordinary members’ club, which existed solely for the supply to their own corporation of the ordinary amenities of a social club. This distinguished the club from a trading concern. Sargent L J goes on to note, following the Styles v New York Life Insurance Company [1889] 2TC460 case (see BIM24035), that there was a complete identity between the providers and the receivers of the social amenities. That is to say a complete identity between the members of the company...
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