CTM40570 - Particular bodies: industrial and provident societies: share and loan interest paid by non-trading societies

ICTA88/S486 (1)

Pre loan relationships legislation

Where a society is not carrying on a trade, any share or loan interest paid by it is, for accounting periods ending before 1 April 1996, treated as a charge on income deductible under ICTA88/S338.

If in such a case the share and loan interest paid in an accounting period exceeds the CT profits of the period, the net CT profits chargeable are reduced to nil, but the excess of charges over income is not normally available for relief against CT profits of any other accounting period.

If the society is an 'investment company', the excess may be available for carry-forward under ICTA88/S75 (3). However because of the need to comply with the conditions for registering as an industrial and provident society (see CTM40505) it is possible that the conditions for qualifying as an Investment company will not be met where the society is registered 'for the benefit of the community' (see CTM40505). This may also be the case for registered housing associations (see CTM40410).

Loan relationships legislation

For accounting periods ending on or after 1 April 1996 FA96 amended ICTA88/S486 (1). Interest is no longer dealt with as a charge but under the loan relationship provisions. Relief for interest payable is therefore available as a Case III debit. Unlike the situation for pre loan relationship accounting periods, because the carry forward of unrelieved interest does not depend on the company's status as an investment company, excess Case III debits may be carried forward and relieved against non-trading profits in the normal way.