CTM40515 - Particular bodies: industrial and provident societies: carrying on trade: dividends etc

ICTA88/S486 (10) & (11)

In computing the Case I, Schedule D trading profits of a registered industrial and provident society the amount to be deducted under ICTA88/S486 (10) and ICTA88/S486 (11) is the full amount of dividend, bonus etc, granted, whether or not the full amount is immediately released to members. Thus a bonus satisfied in whole or in part by the allotment of paid-up shares in the capital of the society or a 'deferred bonus', that is, a bonus treated as an interest-bearing loan repayable at some future date, becomes deductible as soon as it is granted - see Staffordshire Egg Producers Ltd v Spencer 41TC131.

The sums deductible are in strictness the amounts granted in respect of the transactions of the accounting period. But normally there is no need to object to the adoption of the amounts shown by the society's accounts as having been paid or credited in the accounting period, even though these may in some cases include late payments of 'divi' for earlier periods.

In the common case of a society which makes an 'interim' distribution at the end of the first three months of a half-year, and a 'final' distribution after making up its accounts for the half year, the 'interim divi' debited in the accounts for the half year, added to the 'final divi' debited in the accounts for the following half-year, may be taken as the appropriate deduction for the half-year.

In the case of certain societies which sell the produce of their members, the 'divi' takes the form of a bonus calculated by reference to the quantity or value of the sales made to the society by the members, the transactions in such a case being sales to, not purchases from the society.