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HMRC internal manual

Corporate Finance Manual

Other tax rules on corporate finance: building societies

Building societies: general

Building societies raise most of their money from share investors and depositors although they are not restricted to raising money from these sources alone. This money is then lent to borrowers at a higher rate of interest than that paid by the society and the profit or surplus realised as a result is put to reserve. The profit arising from turning over money in this way is assessable as trading income. Such activity forms an integral part of the building society’s trade (see BIM40805 for details of what is meant by ‘integral part of the trade’) and so the building society will invariably have trading loan relationships as a creditor.

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

Special provision is made (CTA2009/S498) 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 regime.

See CFM14000+ for the definition of a building society and the regulatory rules that apply to building societies

See CFM71030 for the treatment of dormant accounts by building societies

See CFM71060 for information on transfers of business/engagements by building societies

See CFM75000+ for the tax deduction rules to be applied by building societies

Further information on building societies is located in the Company Taxation Manual at CTM49000 onwards.