CTM40470 - Particular bodies: housing associations: self-build societies

ICTA88/S489

Self-build housing societies are usually formed to build houses for sale to members. As each house is completed the member moves in, as tenant or licensee, and pays a rent. When all the houses are completed, they are conveyed to individual members and the society is wound up.

A self-build society approved under ICTA88/S489 obtains exemption from tax in respect of rents paid to the society by members and from CT on chargeable gains on disposals to members.

There was no provision for direct relief to members for interest paid by the society but approved societies could (prior to 5 April 2000) obtain loans within the MIRAS arrangements providing relief by deduction of tax at source.

To qualify for approval under ICTA88/S489, a self-build society must exist for the purpose of building or improving dwellings, mainly by use of its members' own labour, for eventual sale to its members for their occupation. The society must be registered under the Industrial and Provident Societies Act 1965 or the Industrial and Provident Societies Act (Northern Ireland) 1969.

Applications for and notifications of approval are made in Great Britain to/by the relevant authority (in Northern Ireland, to the Department of the Environment for Northern Ireland). An extra copy of the letter of approval is sent to the society for enclosure with its claim to tax relief.

Claims are to be made for a year of assessment (notwithstanding the accounting period basis for CT) and must be made within two years of the end of the year of assessment.

Where a self-build society first wishes to claim relief under ICTA88/S489, form 75 ( CTM40430) should be issued in duplicate so that the society may retain a copy. The form calls for:

1. confirmation that no land or house was occupied other than by a member of the society,
2. confirmation that the conditions for approval were observed,
3. a copy of the relevant authority’s letter of approval,
4. a copy of the rules of the society,
5. a copy of the accounts.

Where the claim is acceptable, the reliefs mentioned above may be allowed and any other profits as shown by the accounts assessed in the normal way. For years subsequent to the first year of claim form 75 should be issued annually on or shortly after 6 April until the society is wound up.

Where a member has died, occupation by his beneficiary is treated as satisfying the membership requirement for six months.

The Board has powers to admit claims where the statutory requirements are substantially complied with. Such cases should be reported to CT&VAT (Technical).