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Treatment of interest and qualifying charitable donations for building societies

Liabilities in respect of core capital deferred shares (CCDS) issued by building societies do not fall within the loan relationship regime¹ and are taxed as dividends for the investors; see 'Share capital of building societies' at D7.730.

However a liability to pay dividends and interest in respect of other shares in, deposits with or loans to a building society is treated as a liability arising under a loan relationship of the society²(see Division D1.7) and is dealt with for the purposes of corporation tax as follows:

1. Ìý

   •ÌýÌýÌýÌý dividends and interest accrued as payable in a society's accounts are allowable as a deduction for corporation tax purposes. HMRC have confirmed that loan relationships such as subordinated debt and other long-term securities are normally treated as being for the purposes of a society's trade³. Dividends and interest on any non-trading loan relationships are allowed as non-trading debits

2. Ìý

   •ÌýÌýÌýÌý if the dividends or interest are payable to a company, they