Budget Notes

BN39 STAMP DUTY: ALTERNATIVE FINANCE: SUKUK

Who is likely to be affected?

1. Individuals and companies wishing to invest in alternative finance investment bonds which are similar to debt securities ("sukuk").

General description of the measure

2. Legislation will be introduced in Finance Bill 2008 to classify alternative finance investment bonds as loan capital for stamp duty purposes. These products replicate the economic effect of debt securities which carry a right to interest and the measure will ensure that they are treated on a par with equivalent debt securities falling within the definition of loan capital.

Operative date

3. These changes will have effect for transfers of loan capital on or after the date that Finance Bill 2008 receives Royal Assent.

Current law and proposed revisions

4. Finance Act 2005 classified alternative finance investment bonds as debt securities for the purpose of tax, excluding stamp duty. These changes bring the treatment of alternative finance investment bonds in line with other taxes by classifying them as debt securities.

5. The proposed changes classify alternative finance investment bonds as loan capital and the return as a right to interest so that the bonds may benefit from the loan capital exemption.

Further advice

6. If you have any questions about this change, please contact Nicky Rass on 020 7147 2802 (email: Nicola.Rass@hmrc.gsi.gov.uk). Information about Budget measures is available on the HM Revenue & Customs website at www.hmrc.gov.uk