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Islamic Mortgages

Rent or interest ?

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Has anybody dealt with the tax tretament of Islamic BTL Mortgages ? They are the same as non muslim mortgages but under sharia law an observat muslim cannot charge or pay interest. So they get round this by the borrower  'renting' a proportion of the property. The lender remains the legal owner and the borrower pays 2 elements - the capital repayment and instead of interest pays 'rent' which diminishes over time till he owns all the property. Clearly the capital repayment is not an allowable deduction but the 'rent' should be , and if it is should only 50% be claimed for 19/20 and only 75% for 2017/18 etc to mimic the interest treatment ? Any help would be appreciated

 

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RLI
By lionofludesch
11th Jul 2019 08:51

Is the lender a proper financial institution ?

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Replying to lionofludesch:
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By seitler
11th Jul 2019 10:17

Yes, its not some private individual. Looks like a mainstream Islamic bank

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By Duggimon
11th Jul 2019 09:28

PIM4460 outlines the finance cost restriction, the first line of which is:

"From April 2017 the cost of getting a loan or alternative finance to buy a property that is let, and any interest on those loans and alternative finance is restricted for residential let properties (ITTOIA05/S272A)."

In this context, alternative finance refers to Shari'a compliant loans.

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Lone Wolf
By Lone_Wolf
11th Jul 2019 09:41

I do wonder if Allah would approve of this arrangement. Seems to be a blatant disregard for his rules, basically charging interest but calling it something else.

It's a bit like being told God forbids the use of shovels, so you use a spade instead.

No virgins for your client I'm afraid.

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Replying to Lone_Wolf:
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By Mr_awol
11th Jul 2019 10:37

Exactly.

I don't really care about the religious side - that's for the client and their own conscience to reconcile. I do make clear however that it will be subject to s24 restrictions on 'financing'. I avoid the term 'interest' but as far as I'm concerned that's clearly what it is.

Edit: Actually, I'm not quite convinced on your shovel/spade analogy, as there is actually a difference between the two. It would be more like still using a shovel and CALLING it a spade.

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Replying to Lone_Wolf:
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By Tax Dragon
11th Jul 2019 10:37

Never much fun for the women, is it? (I think, even in these modern times, the virgins are still assumed to be female.)

And look at what happened with the apple. Adam ate it, Adam blamed Eve ("she gave it to me, I ate") and Eve's pain in childbirth went up.

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Replying to Tax Dragon:
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By legerman
11th Jul 2019 10:43

Tax Dragon wrote:

And look at what happened with the apple. Adam ate it, Adam blamed Eve ("she gave it to me, I ate") and Eve's pain in childbirth went up.

How do you know it was an apple?

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Replying to legerman:
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By Tax Dragon
11th Jul 2019 10:52

Not everything is written.

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Replying to Tax Dragon:
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By Vile Nortin Naipaan
11th Jul 2019 10:52

Tax Dragon wrote:

Never much fun for the women, is it? (I think, even in these modern times, the virgins are still assumed to be female.)

Oh, come on! Male virgins aren't any fun! Lacking both maturity and experience.

And I'm sure it was Eve that worried way to much about the opinions of her asp!

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Replying to Vile Nortin Naipaan:
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By Tax Dragon
11th Jul 2019 10:55

Vile Nortin Naipaan wrote:

Male virgins aren't any fun!

That depends on the woman.

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Replying to Tax Dragon:
Lone Wolf
By Lone_Wolf
11th Jul 2019 12:04

Tax Dragon wrote:
Never much fun for the women, is it? (I think, even in these modern times, the virgins are still assumed to be female.)

Not at all. Every time some nutter blows himself to kingdom come in the hope of acquiring his many virgins, I take a little solace that it is most likely a bunch of male, spotty, 35 year old Dungeons and Dragons fans that he's going to get.
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Replying to Lone_Wolf:
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By Tax Dragon
11th Jul 2019 12:16

Just in case anyone else misread that way I did at first… by "get" you of course mean "as his reward".

There may be some Wolf Quest fans waiting there too.

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Replying to Lone_Wolf:
By ireallyshouldknowthisbut
11th Jul 2019 11:30

I can assure you there is a distinct difference between a shovel an a spade.

Try moving sand with a spade, or digging with a shovel.

But yes, like many things religious, its a complete fudge. Most religions do the same.

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Replying to ireallyshouldknowthisbut:
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By Tax Dragon
11th Jul 2019 11:43

Is there actually a rule about not using shovels? The way y'all are talking about it, it's like one of the ten commandments or something.

And it's not just religion that men fudge up. The common factor is men… and, like Adam, you're still all blaming someone else.

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Replying to Tax Dragon:
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By Mr_awol
11th Jul 2019 12:34

Tax Dragon wrote:

Is there actually a rule about not using shovels? The way y'all are talking about it, it's like one of the ten commandments or something.

- You can only have one Shovel.
- Don't Idolise any other Shovels.
- Don't call your Shovel a Spade.
- No Shovelling on a Sunday.
- Help your parents with any Shovelling (or other work) they have.
- Don't whack anyone with your Shovel.
- Don't Shovel another man's sand.
- Hands of other people's Shovels (or anything else that isn't yours).
- Don't tell anyone what your neighbour does with (or without) his Shovel.
- The Shovel isn't always wider on the other side of the fence.

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Replying to ireallyshouldknowthisbut:
RLI
By lionofludesch
11th Jul 2019 11:47

ireallyshouldknowthisbut wrote:

I can assure you there is a distinct difference between a shovel an a spade.

Absolutely. Shovels have flanges. Spades don't.

You can tell the folk who've never done any hard physical graft.

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Replying to lionofludesch:
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By Vile Nortin Naipaan
11th Jul 2019 11:50

Some people just don't give a fork to be honest!

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Replying to Vile Nortin Naipaan:
RLI
By lionofludesch
11th Jul 2019 11:51

Classic.

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By Mr_awol
11th Jul 2019 10:31

It's just interest - ignore the pretence that it's rent. It's even calculated by APR with the 'Bank Variable Base Rate' being based upon Bank of England Base Rate plus margin!

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Replying to Mr_awol:
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By atleastisoundknowledgable...
11th Jul 2019 12:47

Mr_awol wrote:

It's even calculated by APR with the 'Bank Variable Base Rate' being based upon Bank of England Base Rate plus margin!

Unbelievable!

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Replying to atleastisoundknowledgable...:
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By Mr_awol
11th Jul 2019 12:57

atleastisoundknowledgable... wrote:

Mr_awol wrote:

It's even calculated by APR with the 'Bank Variable Base Rate' being based upon Bank of England Base Rate plus margin!

Unbelievable!

I know. Tell be the difference between this and any other 95%FTV mortgage:
*Fixed 4.99%*
-Rental rate fixed until 30 September 2022
-From 1 October 2022 reverts to Al Rayan Bank Variable Rental Rate which for HPP = 4.74% (Bank of England Base Rate + 3.99% margin)
-Administration fee of £999
https://www.alrayanbank.co.uk/home-finance/home-purchase-plan/95-ftv/

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Replying to Mr_awol:
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By SWAccountant
11th Jul 2019 13:11

Yup, sure looks like rent to me! Even includes the word "rent".

Case closed, right?

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Replying to Mr_awol:
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By atleastisoundknowledgable...
11th Jul 2019 18:37

95%!!!
There’s the difference- you wouldn’t get that LTV rate on a ‘proper’ mortgage.

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By Tax Dragon
11th Jul 2019 13:09

I'm going for the full fudging house. We've talked money, sex and religion in this thread. Time for the politics.

You just know we'll end up being EU compliant (and paying in) but calling it Brexit.

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Replying to Tax Dragon:
RLI
By lionofludesch
11th Jul 2019 13:14

Full fudge.

Sounds good.

Any tablet ?

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Replying to lionofludesch:
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By Tax Dragon
11th Jul 2019 13:29

You, Lion, are salted caramel.

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Replying to Tax Dragon:
RLI
By lionofludesch
11th Jul 2019 13:42

Well, I thought I'd give you a Boost. It's After Eight, so you need a Time Out.

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Replying to Tax Dragon:
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By atleastisoundknowledgable...
11th Jul 2019 18:39

Tax Dragon wrote:

You, Lion, are salted caramel.

Have they changed the recipe for Lion bars?

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Replying to atleastisoundknowledgable...:
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By Tax Dragon
11th Jul 2019 18:52

atleastisoundknowledgable... wrote:

Have they changed the recipe for Lion bars?

They didn't need to.

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By Red Leader
11th Jul 2019 17:48

Farce.

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By Tax Dragon
11th Jul 2019 18:06

I'm not really sure why you're all so cynical. Something might be calculated in the same way as interest. That doesn't make it interest. There's an ongoing discussion in these very pages as to whether lifelong loans funded by employers are loans. Things aren't always as they seem.

The as-if interest has tax sections dedicated to it. It's treated for tax like interest.

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