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ATED and Islamic Finance

is ATED required?

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If a residential property over 500k is refinanced using Islamic Finance (Ljara leasing to be exact) the asset is owned by the bank and leased back for the term - in which case would ATED apply?

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By Justin Bryant
03rd Jun 2020 08:46

A very good question. Assuming the borrower is a company, at the end of the day either the bank or borrower will have to deal with ATED (depending on which is treated as the beneficial owner), as ATED returns will be due from either (there is no exemption for banks or large companies) and if it's the bank then they will want to shift the liability to the borrower. If the borrower is a non-company, you still have the latter potential problem. If a relief is due then it's in the interests of the borrower to have ATED returns filed to claim that.

I suggest you call HMRC's ATED helpline to confirm this on a no names basis.

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By Tax Dragon
03rd Jun 2020 09:00

It is a good question. (A related SDLT question occurs to me too.) "The beneficial owner" is an oft-cited but sometimes unhelpful phrase. Owner of what? Both bank and borrower benefit here; both have an interest in the property.

A chargeable interest (FA2013 s107) is an estate, interest, right or power in or over land or the benefit of an obligation, restriction or condition affecting the value of any such estate, interest, right or power.

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