CTM40565 - Particular bodies: industrial and provident societies: share and loan interest paid by trading societies

ICTA88/S486 (1)

Pre loan relationships legislation

Where an industrial and provident society is carrying on a trade, share and loan interest paid by it is, for accounting periods ending before 1 April 1996, treated as deductible in arriving at the trading income of the accounting period in which the interest is paid.

It is necessary for an annual general meeting of the society to approve payment of share interest and as a result there may be a delay in crediting the interest in the books of the society and/or the shareholder. In practice, where such a delay is not excessive, both share and loan interest may be regarded as paid at the date to which the interest is calculated.

Where the trading income before deduction of interest is less than the interest, the deduction should be regarded as giving rise to a loss available for relief under ICTA88/S393 (1) or ICTA88/S393A (1).

Loan relationships legislation

Where an industrial and provident society is carrying on a trade, share and loan interest is, for accounting periods ending on or after 1 April 1996, treated as interest under a loan relationship of the society and therefore as a deduction in computing the trading profit or loss.

Returns of share and loan interest

Returns by industrial and provident societies of share and loan interest are made by reference to payments in accounting periods. Form 8(IPS) and 8(IPS) slips are provided for this purpose, ICTA88/S486 (6) & (7).

The time limit for making such a return is three months after the end of the accounting period. Failure to make a return debars a society from obtaining relief for the interest in question. See AP3783 for the monetary limits that apply.