Societies registered under the Industrial and Provident
Societies Acts are bodies corporate. Industrial and provident
societies are therefore companies for tax purposes and are liable
to CT in respect of their profits, which are computed in accordance
with normal rules as amended by ICTA88/S486. The key differences
lie in the treatment of ‘share and loan interest’ paid
by a society (see
CTM40560 to CTM40570) and, for those
societies carrying on a trade, the treatment of dividends paid by
reference to the transactions a member has with the society (see
Industrial and provident societies are registered (since 1 December 2001) by the Mutual Societies Registration section of the Financial Services Authority (they were previously registered by the Registrar of Friendly Societies) in England, Wales and Scotland, and by the Registry of Companies, Credit Unions and Industrial and Provident Societies in Northern Ireland. They enjoy limited liability in the same way as companies registered under the Companies Acts.
A society may register as an Industrial and Provident Society if it satisfies either of the two conditions found at Section 1 (2) of the Industrial and Provident Societies Act 1965.
The conditions are that:
There is no statutory definition of a 'bona fide co-operative' society but there are criteria laid down by the Financial Services Authority and the appropriate registry in Northern Ireland. The criteria are:
The aim is to ensure a genuine community of interest amongst a society's members based on something other than the amount of capital they have placed in the society. The Industrial and Provident Societies Act 1965 defines a co-operative society as not including 'a society which carries on, or intends to carry on, business with the object of making profits mainly for the payment of interest, dividends, or bonuses on money invested or deposited with or lent to, the society or any other person'.
A society 'for the benefit of the community' must principally show that:
A ‘bencom’ must also meet the requirements in
respect of interest on share on loan capital as for a bona fide
Subject to the above constraints societies are entitled to carry on any business or trade.
Examples of industrial and provident societies include:
An industrial and provident society must have at least three members (but this is reduced to two where both are industrial and provident societies, in which case it is known as a ‘federal’ industrial and provident society. There is no equivalent to the authorised share capital of a Companies Act company and therefore no limit to the number of shares that may be issued. There is a maximum share subscription limit of £20,000 for individuals and non-industrial and provident society corporates although these limits do not normally apply to shares held by another industrial and provident society or local authority. The rules of any particular industrial and provident society may specify lower limits.
A registered industrial and provident society is not a close company because of ICTA88/S414 (1)(b).