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HMRC internal manual

Savings and Investment Manual

Relief for interest paid: interest in a co-operative

Loan to invest in a co-operative

ITA07/S401 and ITA07/S402 provide relief for a loan obtained by an individual and applied in acquiring shares in a co-operative body (as defined in the Industrial Common Ownership Act 1976), or in lending money to any such body which is used wholly and exclusively for the purposes of the business of that body or of a subsidiary of that body, or in paying off another eligible loan.

Eligibility conditions

ITA07/S402 requires Conditions A to C to be met.

Condition A is at the time the interest is paid, the body continues to be a co-operative.

Condition B is that in the period from the use of the loan to the payment of interest, the claimant worked for the greater part of his or her time as an employee of the co-operative body or of a subsidiary of that body.

Condition C is in the period applicable for condition B, the claimant has not recovered any capital from the body, other than capital that is used to repay the loan.

Recovery of capital

Where there is a recovery of any capital from the company, ITA07/S406 provides that relief for interest paid is restricted in the way described in SAIM10250. ITA07/S407 (3) defines recovery of capital in the case of a co-operative as

  • sale, exchange or assignment of the shares,
  • repayment of the part of the shares,
  • assignment of a debt due from the co-operative, or
  • where the co-operative repays some or all of the loan or advance from the individual.

In transactions not at arm’s length the consideration is to be taken to be equal to the market value.