Annex 1: Minor changes in the law Change 46: Co-operative housing associations and self-build societies: change from tax year to accounting period: sections 642, 647, 648, 651, 655 and 656.
This change amends the references to year of assessment in relation to co-operative housing associations (section 488 of ICTA) and self-build societies (section 489 of ICTA).
These bodies are all within the charge to corporation tax. However, in the source legislation, their claims to exemption in respect of rents receivable from tenants are in terms of tax years. This is because there is also a potential impact on the tenant’s income tax liability - for example, the tenant might have been entitled to deduct the rent payable as an expense for tax purposes.
In addition, earlier versions of the legislation transferred entitlement to relief for interest payable from the association/society to the tenant under the relief for mortgage interest provisions until that relief was abolished. It therefore made sense to operate by reference to tax years.
In contrast, the exemption from corporation tax on chargeable gains in respect of disposals of property by these bodies to their members has always been by reference to an accounting period.
As the link to mortgage interest relief has now gone the rationale for retaining the tax year as the basis of the claim and relief is significantly reduced and this change therefore standardises the claim and relief on the basis of an accounting period.
There is no need for a transitional provision as these bodies can claim for part of a tax year or accounting period so no there be no gaps in eligibility for exemption.
This change is in principle and in practice adverse to some taxpayers and favourable to others. But the numbers affected and the amounts involved are likely to be small.