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HMRC internal manual

Company Taxation Manual

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HM Revenue & Customs
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Building societies: application of CT: loan relationships

CTA2009/Part 5 (formerly FA96/S80 - FA96/S105 and FA96/SCH8 - FA96/SCH15)

The loan relationships provisions (see CFM30000 onwards) apply to building societies.

A building society will generally have a loan relationship whenever it is a creditor or debtor for a money debt (see CFM31020 onwards). This will include gilts, bonds, mortgage loans and deposits.

Profits, gains or losses from the loan relationships of a building society’s trade will be included in its computation of liability under Case I Schedule D.

Profits, gains or losses from loan relationships that are not part of a building society’s trade will be included in its computation of liability under Case III Schedule D.

Special provision is made (CTA2009/S498(2) (formerly ICTA88/S477A (3)(a))) to the effect that liability to pay dividends and interest by a building society on all shares in (including permanent interest bearing shares) and deposits with or loans to a society are treated as a liability arising under a loan relationship of the society and are, therefore, within the loan relationships.

Dividends and interest, which are treated as a liability arising under the loan relationships of the society’s trade, will, therefore, be allowable as a deduction under Case I Schedule D. Most of the society’s loan relationships, subordinated debt and other long-term securities will be for the purposes of the society’s trade.

Discounts and premiums on securities issued as part of a building society’s trade are allowable or taxable under Case I Schedule D.

Discounts on non-trading securities are allowable as a non-trading deficit. Premiums on non-trade securities will be taxable under Case III Schedule D.

A building society prepares its statutory accounts in accordance with the Building Societies Act 1986 and The Building Societies (Accounts and Related Provisions) Regulations 1998 (SI1998/504) as amended.