§ Mr. Kenneth Clarke
asked the Chancellor of the Exchequer what tax advantages or preferential treatment are available to co-operative enterprises compared with other companies and firms.
§ Mr. Denzil Davies
A co-operative enterprise does not necessarily have any tax advantages or preferential treatment, but certain special tax provisions may apply.
A registered industrial and provident society qualifies for the special rate of corporation tax of 40 per cent. under Section 96 of the Finance Act 1972. Share or loan interest paid by such a society is not treated as a distribution for tax purposes but is deductible in computing its income or treated as a charge on its 54W income. Such interest is paid without deduction of tax but is charged to tax on the recipient. A transfer of an asset from one such society to another on an amalgamation of the societies is treated for capital gains purposes as taking place at such a price as will give rise to no gain or loss to the transferor.
Certain co-operative associations engaged in agriculture, horticulture or fishing qualify for broadly the same tax treatment as registered industrial and provident societies; and there are some special tax reliefs for co-operative housing associations and self-build societies.
Co-operative societies can benefit from the capital transfer tax exemption and from the deferment of tax on capital gains for gifts to employee trusts.