PART XII SPECIAL CLASSES OF COMPANIES AND BUSINESSES

CHAPTER IV BUILDING SOCIETIES, BANKS, SAVINGS BANKS, INDUSTRIAL AND PROVIDENT SOCIETIES AND OTHERS

486 Industrial and provident societies and co-operative associations.

1

M1Notwithstanding 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 F5for the purposes of corporation tax; F1but interest payable by such a society (whether as share interest or loan interest) shall be treated for F6those purposes as interest under a loan relationship of the society.

2

F9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

F9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

Any share interest or loan interest paid by a registered industrial and provident society shall be chargeable under Case III of Schedule D F7for the purposes of corporation tax.

5

F8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6

F9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7

If for any accounting period a return under F10section 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 F2not be brought into account in that period for the purposes of Chapter II of Part IV of the Finance Act 1996 (loan relationships).

C1C2C38

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 F3profits chargeable under Case I of Schedule D (“the tax computation”), any F3profits 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 F4Secretary 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—

    1. a

      a society registered or deemed to be registered under the M2Industrial and Provident Societies Act 1965 or under the M3Industrial and Provident Societies Act (Northern Ireland) 1969, or

    2. b

      an SCE formed in accordance with M4Council 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.