Dividends from co operative society are *
Answers
Explanation:
A co-operative society is free to set dividends at whatever rate it deems reasonable, bearing in mind the guidance provided by the ICA Statement on the Co-operative Identity. The FCA offers no guidance on this matter, and society legislation imposes no limits. The management committee of a co-operative society has a duty to determine a rate that will further the objects of the society. In most cases, the management committee will recommend a dividend rate for approval at an annual general meeting of members.
If a society’s rules allow it, dividends can be paid into the member’s share account, which will bolster the share capital held by the society. Dividends are treated as a pre-profit expense and are deductible for corporation tax purposes. The income tax treatment of co-operative dividend income is dealt with in Section 8.3.
In contrast to dividends, interest on share capital has a lesser role in co-operative societies. The ICA Statement on the Co-operative Identity, Values and Principles, says “members usually receive limited compensation, if any, on capital subscribed as a condition of membership.” This could be taken to mean that it only applies to the minimum investment requirement, not the actual amount of share capital held by a member.