»Ê¹ÚÌåÓýapp

Overview

Chapter 6 of Part 6 CTA09 treats arrangements that comply with Shari’a law as falling within the loan relationships regime. »Ê¹ÚÌåÓýappse rules are not limited to Shari’a compliant products but also apply to any finance arrangement that falls within their terms.

»Ê¹ÚÌåÓýapp rules in CTA09/PT6/CH6 refer to ‘alternative finance arrangementsâ€�, and provide, broadly, a level playing field for tax purpose between conventional financial arrangements and ones that are differently structured but give an economically equivalent return. See CFM11120 for more on Shari’a compliant financial arrangements.

Shari’a law prohibits transactions that involve interest, and arrangements for the borrowing or lending of money will usually involve some form of risk sharing instead. »Ê¹ÚÌåÓýapp return from many such arrangements is economically equivalent to interest. Where the arrangements meet certain conditions, the tax rules provide for the return from the arrangements to be taxed as interest in the hands of a taxpayer subject to income tax rules (see the Savings and Investment Manual SAIM2000), and as loan relationships credits and debits for a corporate taxpayer.

»Ê¹ÚÌåÓýapp rules do not change the nature of the financial arrangements, or impute interest, or deem interest to arise where there is none.

»Ê¹ÚÌåÓýapp return is known as ‘alternative finance returnâ€�. »Ê¹ÚÌåÓýapp original legislation in FA 2005 (CFM44020) referred to ‘alternative finance returnâ€� and ‘profit share returnâ€� but this was a difference in terminology only. »Ê¹ÚÌåÓýapp amounts were treated the same for CT purposes - as amounts paid or received that are economically equivalent to interest.