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A club which is established by members for social or recreational purposes is unlikely to be a liable to tax on any surplus which arises from transactions with its members as the surplus does not arise from a trade. If the subscriptions exceed expenses in any year, the surplus is not a trading profit because the activities lack the commerciality to be a trade, see details on what is a trade at B1.401. Because the club is not trading the question of mutual trading does not arise even in connection with such matters as meals and bar sales. The members are not buying and selling food and alcohol; they own it jointly and are consuming their own property¹.

However, if a club provides services on a commercial basis to non-members such as visitors or temporary members, for examples food or drink provided to non-members for a charge, then any surplus from these transactions would be taxable as trading income. The expenses of the club would have to be allocated between trading and non-trading