Income and Corporation Taxes Act 1988

486 Industrial and provident societies and co-operative associations. U.K.

(1) M1 Notwithstanding anything in the Tax Acts, share interest or loan interest paid by a registered industrial and provident society shall not be treated as a distribution [F1 for the purposes of corporation tax]; [F2 but interest payable by such a society (whether as share interest or loan interest) shall be treated for [F3 those purposes] as interest under a loan relationship of the society.]

(2) F4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) F4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) Any share interest or loan interest paid by a registered industrial and provident society shall be chargeable under Case III of Schedule D [F5 for the purposes of corporation tax].

(5) F6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) F4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) If for any accounting period a return under [F7 section 887(2) of ITA 2007] above is not duly made by a registered industrial and provident society, share and loan interest paid by the society in that period shall [F8 not be brought into account in that period for the purposes of Chapter II of Part IV of the Finance Act 1996 (loan relationships).]

(8) If in the course of, or as part of, a union or amalgamation of two or more registered industrial and provident societies, or a transfer of engagements from one registered industrial and provident society to another, there is a disposal of an asset by one society to another, both shall be treated for the purposes of corporation tax in respect of chargeable gains as if the asset were acquired from the society making the disposal for a consideration of such amount as would secure that neither a gain nor a loss would accrue to that society on the disposal.

(9) Subsections (1) and (8) above shall have effect as if references to a registered industrial and provident society included any co-operative association established and resident in the United Kingdom, and having as its object or primary object to assist its members in the carrying on of agricultural or horticultural businesses on land occupied by them in the United Kingdom or in the carrying on of businesses consisting in the catching or taking of fish or shellfish.

(10) It is hereby declared that, in computing, for the purposes of any provision of the Tax Acts relating to [F9 profits] chargeable under Case I of Schedule D (“the tax computation”), any [F9 profits] of—

(a) any registered industrial and provident society which does not sell to persons not members thereof; or

(b) any registered industrial and provident society the number of the shares in which is not limited by its rules or practice;

there are to be deducted as expenses any sums which—

(i) represent a discount, rebate, dividend or bonus granted by the company to members or other persons in respect of amounts paid or payable by or to them on account of their transactions with the company, being transactions which are taken into account in the tax computation; and

(ii) are calculated by reference to those amounts or to the magnitude of those transactions and not by reference to the amount of any share or interest in the capital of the company.

(11) No dividends or bonus deductible in computing income as mentioned in subsection (10) above shall be regarded as a distribution.

(12) In this section—

• “co-operative association” means a body of persons having a written constitution from which the Minister is satisfied, having regard to the provision made as to the manner in which the income of the body is to be applied for the benefit of its members and all other relevant provisions, that the body is in substance a co-operative association;

• “the Minister” means—

• the [F10 Secretary of State], as regards England and Wales;

• the Secretary of State, as regards Scotland; and

• the Department of Agriculture for Northern Ireland, as regards Northern Ireland;

• [F11 “registered industrial and provident society” means—

  (a)

  a society registered or deemed to be registered under the M2 Industrial and Provident Societies Act 1965 or under the M3 Industrial and Provident Societies Act (Northern Ireland) 1969, or

  (b)

  an SCE formed in accordance with M4 Council Regulation (EC) 1435/2003 on the Statute for a European Co-Operative Society;]

• “share interest” means any interest, dividend, bonus or other sum payable to a shareholder of the society by reference to the amount of his holding in the share capital of the society;

• “loan interest” means any interest payable by the society in respect of any mortgage, loan, loan stock or deposit;

and references to the payment of share interest or loan interest include references to the crediting of such interest.

Textual Amendments

F1 Words in s. 486(1) inserted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 188(2)(a) (with Sch. 2)

F2 Words in s. 486(1) substituted (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), Sch. 14 para. 30(a) (with Sch. 15)

F3 Words in s. 486(1) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 188(2)(b) (with Sch. 2)

F4 S. 486(2)(3)(6) repealed (6.4.2007 with effect in accordance with s. 1034(1) of the repealing Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 90(2), Sch. 3 Pt. 1 (with Sch. 2)

F5 Words in s. 486(4) inserted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 188(3) (with Sch. 2)

F6 S. 486(5) repealed (6.4.2005 with effect in accordance with s. 883(1) of the repealing Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 188(4), Sch. 3 (with Sch. 2)

F7 Words in s. 486(7) substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 90(3) (with Sch. 2)

F8 Words in s. 486(7) substituted (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), Sch. 14 para. 30(b) (with Sch. 15)

F9 Words in s. 486(10) substituted (31.7.1998) by Finance Act 1998 (c. 36), s. 46(3)(a), Sch. 7 para. 1

F10 Words in s. 486(12) substituted (27.3.2002) by The Ministry of Agriculture, Fisheries and Food (Dissolution) Order 2002 (S.I. 2002/794), art. 1(2), Sch. 1 para. 31

F11 S. 486(12): definition of "registered industrial and provident society" substituted (29.11.2007) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2007 (S.I. 2007/3186), reg. 1(2), Sch. 2 para. 16

Modifications etc. (not altering text)

C1 See 1988(F) Sch.8 para.1—re-basing to 1982.

C2 S. 486(8) excluded (with effect in accordance with s. 131(4) of the affecting Act) by Finance Act 1995 (c. 4), s. 131(1)(2)(b)

C3 S. 486(8) excluded by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 117A(7)(8)(b), 117B(5)(6)(b) (as inserted (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), Sch. 14 para. 62 (with Sch. 15))

Marginal Citations

M1 Source—1970 s.340, 345; CUA 1979 s.25(2)

M2 1965 c. 12.

M3 1969 c. 24 (N.I.).

M4 OJ L 207, 18.8.2003. p1.