The tax treatment of credit unions and credit union savings accounts reflects the distinct social and voluntary character of these bodies. Credit unions are exempt from corporation tax, and income arising from credit union savings accounts is not subject to deposit interest retention tax. However, individuals are obliged to report such income in their annual tax returns to the Revenue Commissioners, and the income is taxable at the individual's marginal rate. Credit unions are required to notify Revenue automatically of interest payments in excess of £500 per annum in respect of individual deposit accounts; the dividend income in respect of the initial shareholding of £6,000 with a credit union is not subject to this automatic reporting requirement. In addition, under the general legislation governing third-party returns, Revenue may request details of all payments in excess of £50 made by a credit union.
I am aware that the concerns have been expressed by building societies in regard to the expanding role of credit unions as providers of financial services to the community and the appropriateness of the current tax provisions in these circumstances. I will be reviewing the position in the light of these concerns, and in the context of whatever proposals are made in the forthcoming credit union legislation to allow credit unions to develop their financial services. The Deputy will be aware of the important contribution of the credit union movement in particular in supporting members of the community who would otherwise have found it difficult to obtain access to credit, and I will be anxious to keep this in mind in any such review.
