CTM49640 - Building societies: application of CT: conversion into plc

A building society may transfer the whole of its business to a public limited company under Section 97 of the Building Societies Act 1986. As the arrangements for conversion will vary, CT&VAT (Technical) will issue detailed advice whenever a society converts.

The main effects of conversion for the society are as follows:

  • Investments which are loan relationships of the society and successor company will be taken into account under CTA2009/S307 (2) (formerly FA96/S85A). However, the provisions of CTA2009/Part 5 Chapter 4 and S444 and S445 (formerly FA96/SCH9/PARA11 or 12) may apply to any transfer of the loan relationships.
  • Capital allowances are calculated as if no change of ownership had occurred.
  • There is no charge to CT on any chargeable gains arising on the transfer of assets from the society to the successor company (see CG41010), and
  • Compensation dividends, including the statutory distribution made under Section 100 (2) of the Building Societies Act 1986, or cash in lieu of a right to acquire shares in a society’s successor company, are not regarded as distributions or as dividends on which tax is payable by the society and if paid by the society they are not allowable deductions for CT purposes.

Save as you earn schemes continue to be exempt from both IT and CGT after the conversion, as if there had been no change in the contracting parties.