CTM40420 - Particular bodies: housing associations: co-operatives - nature of relief

ICTA88/S488 provides various reliefs to approved co-operative housing associations (CTM40425) as follows:

1. Rents paid to the association by members are disregarded for tax purposes.
2. For periods after 6 April 2000, yearly interest paid by the association in respect of let property is also disregarded for its tax purposes. For periods from 6 April 1983 up to 5 April 2000 MIRAS may have applied to any loan and different rules applied (see CTM40430).
3. Interest paid in respect of unlet property is not disregarded as in (b) and is allowable under the appropriate provisions.
4. For periods up to 5 April 2000, each member is treated for the purposes of ICTA88/S354 (loans to buy land, etc) as if he were the owner of the association’s estate or interest in the property of which he is the tenant.
5. The association is exempt from CT on chargeable gains on the disposal of any property which has been or is occupied by a tenant of the association (see CG12624).

Where relief is allowable under Section 488 the association is still liable to CT on any investment income not specifically exempted by Section 488 such as, for example, interest received on a bank deposit account. It is also liable to CT on other chargeable gains that do not fall within (e) above.

A co-operative housing association will not normally make distributions within the meaning of ICTA88/S209. Similarly, ICTA88/S418 cannot apply because a registered Industrial & Provident Society cannot be a close company (see CTM40505). For periods ending before 1 April 1998, where an association ceased to qualify for relief and, in consequence, became liable to tax under Schedule A on its rental income ICTA88/S488 (3), prevented it from carrying forward and setting against its Schedule A liability any expenses attributable to the period during which it qualified for relief.