Taxes Consolidation Act 1997 section 844

Companies carrying on mutual business or not carrying on a business

Section 844 deals with the treatment of distributions made by companies carrying on mutual business (including mutual insurance) and by companies that do not carry on any trade or investment business, such as incorporated members' clubs.

• Where a mutual trading or mutual insurance company makes distributions to participating members, those distributions are treated as distributions for corporation tax and Schedule F purposes only to the extent that they are made out of profits charged to corporation tax or out of franked investment income.
• Distributions by a mutual life assurance company to participating members derived from mutual activities are not treated as distributions at all — policy bonuses, for example, do not carry a tax credit and are not subject to dividend withholding tax.
• The mutual origin of a distribution does not alter its character for income tax or corporation tax purposes in the hands of the recipient — it retains whatever tax character it would otherwise have.
• A company that has never traded or held investments (for example, an incorporated members' club) is subject to the same rule as a mutual trading company: distributions are treated as distributions only to the extent made from taxed profits or franked investment income.