Commentary on Sections Overview Overview Section 40: Credit unions
180.This section ensures that most credit unions are not treated as carrying on a trade for tax purposes. It is based on section 487 of ICTA.
181.Credit unions are profit-sharing financial co-operatives, owned and managed by their own members, which offer a convenient way of saving and loans to their members.
182.The members make regular savings, as little or as much as they wish. These savings then form a common pool of money from which loans are made to members. When members have been saving for a certain period of time (usually about 12 weeks) they can apply for a loan from the pool. Interest on the loan is charged at about 1% per month on the monthly reducing balance.
183.There are other rules about credit unions:
	in Part 5 (loan relationships);
	in section 133; and
	in section 1218.
184.Subsection (1) is the rule that the usual activities of a credit union are not to be treated as a trade. The rule applies only in the calculation of the credit union’s income. So, if the carrying on of a trade is relevant for some other purpose (for instance, the taxation of chargeable gains), and the credit union is in fact carrying on a trade, the position is not disturbed by this rule.