Readers’ forum: Tax liability on paying out distribution to members

Are the members of an unincorporated club liable to tax when the club distributes unwanted funds to the members in accordance with the club constitution which caters for such a distribution pro rata to years of membership? The details are as follows:

• No member has paid an initial contribution.
• Members pay an annual subscription.
• There is a surplus from mutual trading but much of the distribution will be from the sale of the club premises.
• The club will be liable for corporation tax on the gain.

The premises were used by the members except that there was a flat above with shared access rented to tenants. The club has paid corporation tax on the net rental income. Would the answer be different if the distribution was on a winding up?

Query 20 360– TheythinkIknow.

It’s likely that the distribution would be treated as a capital receipt.

The...