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HMRC internal manual

Company Taxation Manual

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Corporation Tax: management expenses: company status - housing associations

A housing association is usually a company for the purposes of CT. There is general guidance on housing associations at CTM40400 onwards. For some considerable time we took the view that a housing association would not be within the definition of an investment company in ICTA88/S130 (as it applied to periods up to 31 March 2004), because its main business is the provision of housing, and not the making of investments. This arises from Atkinson J’s judgement in an Excess Profits Tax case, CIR v The 1933 Housing Society Ltd [1946] 26ATC355.

However, in Medway Housing Society Ltd v Cook 69TC319, the High Court held that the Society was an investment company within the meaning of ICTA88/S130 (see CTM08020). The judgement does not say that all housing associations will be investment companies. Nor does it say that ‘purpose’ is no longer an important factor in deciding whether a company is within Section 130. In fact Lightman J says:

It seems to me perfectly possible for a property at the same time to be held to provide affordable housing and to provide a profitable return, and for the society’s business to be the provision of affordable housing and to be that of holding such housing to achieve a profitable return, …. It seems to me on principle that, therefore, the purpose and nature of the business of the society is that of holding investments in the form of the portfolio, and nonetheless so because in doing so its object is to fulfil the social purpose of providing affordable housing.

What it does say is that it is also important to look at what the company actually does and why; for example, is it operating in a commercial manner, does it hold the assets as investments to produce a profitable return, and is that incidental to some other business?