5.11 Incentives

The use of incentives to promote the purchase of community shares is acceptable as long as the incentives are consistent with the rules of the society. A community benefit society should not provide personal benefits to members, so any rewards or incentives to purchase shares should not have a resale value. A society using a rewards-based crowdfunding site to promote its share offer should not offer rewards that could be considered a pre-payment for the goods or services of the society.

This does not exclude a society from offering its products or services as rewards in return for donations, in the form of a pre-payment. But, if a society decides to do this, it should ensure that such pre-payments are properly accounted for in its business plan and subjected to the same tax treatment as any other form of trading income.

A society might decide to offer its goods or services in lieu of share interest and/or dividends. This is acceptable, but such payments may be subject to income tax (see Section 8.3) and members should be told how to declare this income to HMRC.

A society might also choose to incentivise membership by offering members’ discounts on products and services, or other forms of special offers. This is acceptable, if such incentives are not associated with either how much share capital the member has invested, or their level of transactions with the society. These types of incentive should be regarded as a marketing and promotion cost, or as part of the pricing strategy of the society. 

If you have any questions or suggestions for new information you would like to find in the Handbook, contact the team by email at communityshares@uk.coop