3.5 Dividends

Co-operative Societies can choose to pay a dividend to members which relates to the amount of trade a member has with the co-op over a particular accounting period. These dividends are similar to a loyalty card payment and must be recognised in the revenue account before arriving at operating profit. 

The accounting and tax treatment of a dividend payment is related to the trading relationship with the society. For example, if it is based around work, it is classed as an employment cost and must be subject to PAYE, if it is based around purchases, then as a reduction in turnover. 

Where the member has earned the right to a dividend that has not yet been paid out, then the value of this must be included in the co-operative’s accounts as an accrual.

In practice, it is very rare for societies to pay dividends and raise capital through community shares. For the avoidance of doubt, community benefit societies and charitable community benefit societies cannot pay dividends.