Corporation Tax Act 2010 section 1056

Dividend or bonus relating to transactions

Section 1056 ensures that certain dividends or bonuses paid by registered societies are not treated as distributions for corporation tax purposes, provided they qualify as deductible trading expenses.

• Applies when a registered society grants a dividend or bonus to its members
• The dividend or bonus must be one that qualifies as a deductible expense under section 132 of CTA 2009
• Where both conditions are met, the payment is excluded from being treated as a distribution
• This prevents double taxation — the society gets a trading deduction and the payment is not also taxed as a distribution