CTM40520 - Particular bodies: industrial and provident societies: carrying on trade: dividend stamps

In the late 1960s many co-operative societies abandoned the payment of dividends in favour of the issue of stamps redeemable for cash or goods. Where such a scheme has been adopted the stamps are given to members and non-members alike on the purchase of goods but in certain co- operative societies a preferential rate of redemption is allowed to members.

The taxation treatment applied to the stamp scheme has been agreed with the Co-operative Union Ltd, and is detailed in a memo issued by the Union to member societies. The agreement provides for a 'periodical review' to be made. This is not a local office review but one which should take place between CT&VAT (Technical) and the Union. The agreement sets out a basis of calculating reserves that will be accepted by the Revenue. An Inspector cannot therefore refuse to consider a calculation made by a different method if he or she were persuaded that it produced an accurate result. However it is not normally open to an Inspector to question calculations based on the agreement.

More recently many retail co-operatives have abandoned stamp schemes and in view of the diminishing number of retail co-operatives still involved in such schemes it is not probable that any further reviews will be carried out. If, however, the facts in any particular case reveal that the actual rate of redemption is significantly below the rates set out in the agreement and there is substantial tax at stake then the case including the file should be submitted to CT&VAT (Technical).