(1)M1Subject to subsection (2) below, in computing for the purposes of corporation tax the income of a credit union for any accounting period—
(a)neither the activity of the credit union in making loans to its members nor in placing on deposit or otherwise investing from time to time its surplus funds shall be regarded as the carrying on of a trade or part of a trade; and
(b)interest received by the credit union on loans made by it to its members shall not be chargeable to tax under Case III of Schedule D or otherwise.
(2)Paragraph (b) of subsection (1) above shall not apply to an accounting period of a credit union for which the credit union is obliged to make a return under section 486(6) and has not done so within three months after the end of that accounting period or such longer period as the inspector shall allow.
(3)No share interest, loan interest or annuity or other annual payment paid or payable by a credit union in any accounting period shall be deductible in computing for the purposes of corporation tax the income of the credit union for that period from any trade carried on by it or be treated for those purposes as a charge on income.
(4)A credit union shall not be regarded as an investment company for the purposes of section 75 above or section 306 of the 1970 Act (capital allowances).
(5)In this section—
“credit union” means a society registered as a credit union under the M2Industrial and Provident Societies Act 1965 or the M3Credit Unions (Northern Ireland) Order 1985;
“” and “loan interest” have the same meaning as in section 486;
“surplus funds”, in relation to a credit union, means funds not immediately required for its purposes;
and references to the payment of share interest or loan interest include references to the crediting of such interest.