CTM40810 - Particular bodies: loan and money societies: thrift funds

Thrift funds are incorporated or unincorporated savings clubs. Members place deposits, usually of a modest nature, with the organisation on a regular (often weekly or monthly) basis. The deposits are usually returned to the members, sometimes with the addition of an interest payment or dividend arising from the investment of the funds, at the end of the relevant accounting period.

Holiday clubs, Christmas clubs and ‘tontines’ are kinds of thrift funds. A ‘tontine’ is an arrangement whereby each subscriber pays a sum into a fund and in return receives dividends from the capital invested. When a subscriber dies his or her share is divided amongst surviving subscribers. The pattern is repeated until such time as only one subscriber remains alive. There is no precise definition of ‘tontine’ and certain designs may fall foul of the Life Assurance Act 1774 which provides that without insurable interest a contract of insurance or life assurance is void.

Thrift funds are treated as companies for tax purposes and are chargeable to CT on any profits in the normal way. An old Extra Statutory Concession which allowed thrift funds to be treated as outside the scope of CT was withdrawn in 2001.

Officers should refer any issues to BAI (Technical).