Commentary

D7.602 Overview—taxation of friendly societies and their members

Corporate tax
Corporate tax | Commentary

D7.602 Overview—taxation of friendly societies and their members

Corporate tax | Commentary

D7.602 Overview—taxation of friendly societies and their members

The purpose of this article is to set out the general structure of the taxation of friendly societies and their members. All aspects mentioned in this introduction are covered in more detail in subsequent articles.

Overview

Whether or not a society pays tax in respect of each of its products depends upon whether each is exempt or taxable, while whether the member or other policyholder pays tax upon the benefits depends upon whether a life policy is qualifying or non-qualifying.

Many friendly societies are completely exempt from corporation tax whether on profits, income or gains. Other societies are partially taxable and partially exempt. Policyholders (other than corporate policyholders) are charged to income tax and capital gains tax. For life investment products, policyholder benefits are charged to income tax under the chargeable event rules, though a charge only arises on qualifying policies in respect of early termination (see D7.612). Annuities received on pension products are taxed in the same way as employment income. First-hand policies are exempt from capital gains tax. Whereas second-hand policies (ie policies acquired from an original purchaser) tend to be within the charge to capital gains tax, it is unusual for policies issued by friendly societies to be traded in the first place.

The articles in this Division cover first corporate taxes (D7.603–D7.611), then personal taxes (D7.612–D7.614) and then some reliefs for incorporation of societies or their conversion to insurance companies (D7.616–D7.618).

Finance Act 2012 – re-write of friendly society provisions

The

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