As part of our efforts to promote a positive business environment we advocate for tax policy that enables and encourages the financing and growth of co-operative and community businesses.
Social Investment Tax Relief Review
In the Spring Statement, government confirmed there will be a review of Social Investment Tax Relief in 2019. Co-operatives UK is eager to work with members with an interest in securing a more useful relief for the sector. Find our more and get involved click below.
Taxation of non-registered provider housing co-operatives
A segment of housing co-operatives are wrongly being made liable to pay punitive taxes intended to combat the tax avoidance/obfuscation practice known as ‘enveloping’. The misapplication of these punitive taxes is having a disproportionate adverse impact by limiting people’s housing options in ways we believe run counter to government housing policy, especially when compared to the negligible revenue earned by the Exchequer in the process. Working with representatives in the co-operative housing movement, we're lobbying HM Treasury asking that existing reliefs are extended to protect the affected housing co-operatives in a way that ensures no new opportunities for tax avoidance are inadvertently created.
Read our review of Budget 2017 here.
HMRC Advance Assurance
We've told HMRC that its plans to withdraw 'advance assurance' for tax reliefs will have a negative impact on community shares and prospects for a more inclusive economy.
Leasing assets and Social Investment Tax Relief
We've told government that a provision in Finance Bill 2017 to make leasing an 'excluded activity' for Social Investment Tax Relief will be damaging for projects that deliver significant community benefit, such as community-led housing.
Autumn Statement 2016
We have provided our members with an assessment of the Autumn Statement from a co-operative perspective.
Accounting Standards - FRS102
With the support of our expert Co-operative Performance Committee we have responded to the Financial Reporting Council's general consultation on its FRS102 accounting standards.
Making Tax Digital
HMRC is tasked with providing all businesses with an all encompassing online tax account by 2020, with transactional functionality. This should make it easier and hopefully cheaper for co-ops to manage their tax affairs. However, co-ops can sometimes struggle to navigate frameworks and processes designed for 'the average' business. Where things run smoothly a reliance on online systems and less human intervention is fine, but we know that things do not always work that way for our members. These issues will need to be ironed out before HMRC completes its transformation or we fear current problems will become ever harder to deal with.
Between August and November 2016 government consulted on key issues.
Innovative Finance ISA
We're trying to stop government excluding co-operative and community benefit societies from the Innovative Finance ISA. There is no good reason to do so. It will put these businesses at a further disadvantage and we'll miss a great opportunity to develop new finance streams for UK co-ops.
Pension Protection Fund
In 2016 Mutual employers are facing an unfair and costly penalisation in the workings of the Pension Protection Fund. This is set to cost co-ops and other mutuals more than £2.5 million in extra pension protection fees in one year alone. We think this issue is caused by a mixture of unintentional institutional bias and serious under-provision for mutual society data in the FCA. Co-operatives UK is actively lobbying on behalf of affected members.
Mutual guarantee societies
We have responded to a HM Treasury consultation on its draft financial services innovation plan. Most importantly we have made the case for regulation to allow businesses to form 'mutual guarantee societies'. These are a successful enterprise-led solution to the challenges of SME finance. They are ‘business-to-business’ co-ops through which sole traders, start-ups and SMEs club together and offer 'mutual guarantees' to lenders, and thus improve their access to finance.
With the rapid rise of disruptive platform solutions across the economy we think the time has come for mutual guarantee societies in the UK.
For more on mutual guarantees see part three of our consultation response.
Autumn Statement 2015
We've taken a look at the detail of George Osborne's Autumn Statement and government's Spending Review to provide members with insight from a co-operative perspective. Headlines include:
- new financing options for co-ops
- new business costs for co-operative employers
- more community energy woes
For more details see here.
International Accounting Standards
We've responded to the International Accounting Standards Board (IASB) consultation on the latest draft of its revised framework, which sets the standardised parameters within which businesses worldwide prepare and report on accounts and performance. As with much else, this framework contains areas where the distinctive features of co-operatives are poorly accommodated, such as in the standard definition of equity. See here.
Following announcements in Budget 2015 government has consulted on extending the list of securities that can be held in ISAs to include debt and equity listed on crowdfunding platforms by co-operative and community benefit societies. In July government changed the ISA rules to include co-operative and community benefit society debt securities listed on 'Recognised Stock Exchanges', something which while potentially welcome for our largest members, is irrelevant to the vast majority of co-ops in the UK. As it is far more feasible for co-ops to access crowdfunding platforms we see genuine opportunity in this most recent consultation to open up new financing avenues for our members. Read our response to government here.
Personal Savings Allowance v Dividend Allowance
In the Summer Budget 2015 government announced two new tax reliefs: the Personal Savings Allowance which makes the first £1,000 of income on savings tax free, and, the Dividend Allowance which makes the first £5,000 of income from dividends and returns on other qualifying investments tax free as well. We had hopes that under the new Dividend Allowance, which will not be a mechanism of the Corporation Tax system, interest on co-operative and community benefit society share capital would be eligible. But as details have emerged its clear government wants to make this share interest eligible for the lessor Personal Savings Allowance instead.
In a recent HMRC consultation we explained how the special nature of society share capital often means it doesn't fit neatly into the UK tax system, made a case for eligibility under the Dividend Allowance, and warned against creating an unfair system that penalises and disincentivises investment in societies. Read our response to HMRC here.
Budget 2015 continued a theme over recent years by containing measures of real importance for co-operative finance, particularly in the fields of community energy and community shares. And again, our policy work has paid off for our members.
Most notably, we helped lead a coalition of co-ops and support bodies to secure another extension of tax relief for community energy co-ops. Unfortunately this was subject to a u-turn in October 2015. See here.
For more on this and other parts of the Budget relevant to co-ops, including new opportunities emerging in the form of co-op ISAs, read our quick briefing Budget 2015: a co-operative perspective.