Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Company Taxation Manual

From
HM Revenue & Customs
Updated
, see all updates

Particular bodies: friendly societies: exemption for 'other business'

Registered Friendly Societies

FA12/S164 exempts a registered society from tax on income or gains relating to ‘other business’.  ‘Other business’ is that part of the business that is not ‘long term business’.  This exemption is given to a society (or branch of a society) registered on or before 31 May 1973.  If societies registered before that date merge to create a new society, they retain their exemption provided that none of the societies had had their exemption withdrawn as mentioned below.  This applies equally to the merger of branches.

Societies registered after 31 May 1973 may also be entitled to an exemption from tax in respect of ‘other business’.  This is dependent on their rules limiting the range of membership or the maximum members’ contributions.

Incorporated Friendly Societies

If a society registered on or before 31 May 1973 subsequently converts to an incorporated society (CTM40310)

it retains its exemption, as provided by FA12/S165 (3) or (5).

Otherwise FA12/S165 (4) exempts an incorporated friendly society from tax on income or gains relating to ‘other business’, again dependent on its rules limiting the range of membership or the maximum members’ contributions.

Cases to be referred to CTIS (Insurance)

If an incorporated society, or a society registered after 31 May 1973, claims repayment or exemption its papers should be referred to CTIS (Insurance) unless its entitlement to exemption has already been confirmed.  It is not necessary to refer a new branch of a registered society if it was created by the merger of two or more branches registered before 1 June 1973.  Such cases can be accepted as entitled to the exemption under FA12/S164 (3).

The legislation provides for the exemption on the income or gains of ‘other business’ to be withdrawn by administrative action if a society exploits its tax privileged position. CTIS (Insurance) should see any case where the ‘other business’ of a society registered before 1 June 1973 has increased at a rate disproportionate to the general level of economic activity.