CTM40545 - Particular bodies: industrial and provident societies: Co-operative deposit protection scheme

The Co-operative deposit protection scheme was established to afford depositors with co- operative societies protection in the event of a society becoming insolvent. On joining the scheme, societies are required to pay an initial contribution. It is considered that such a contribution represents a capital outlay made in order to establish the base of the fund and is not deductible in the Case I computation of the society. The same treatment would apply to a payment made to increase the base fund permanently. Where, however, 'topping-up' payments are made, they may be allowed as deductions in arriving at the Case I profit of societies.

If returns of contributions are made at any time to participating societies they should be dealt with on a 'last in first out' basis, so that refunds of 'topping-up' payments are treated as revenue receipts and any refund of the initial base contribution is regarded as a non-taxable receipt.