Can I rely on what HMRC says about Sharia mortgages in an online webchat?
In short, I’ve just used the HMRC web chat to ask whether the rent element of a Sharia mortgage would be treated the same as interest from Apr 2017 or as a fully allowable cost. Their eventual response was:
“Based upon current guidance rents (if sub-letting) continue to be wholly allowable in the same way as legal costs etc for basic rate and higher rate taxpayers”.
I can paste the whole conversation if it helps. At the risk of mis-using legal expressions, does the HMRC chat operator put vicarious liability onto HMRC if I rely on something they stated (typed) that turns out to be incorrect?
It seems too good to be true but at the same time, it seems absurd that HMRC staff via HMRC’s official website could tell me what the rules are, then decide they didn’t mean it later on without consequences to them.
Darren
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Am I self employed?
Member Since February 2011 - Comments: 3453 - Articles: 286
9:15 AM, 24th January 2017, About 9 years ago
Hi Darren,
As a percentage of turnover your business is the one at risk not HMRC so if you have any doubts about advice you have been given you owe it to yourself to investigate the answer until you are satisfied.
There is nothing more annoying than being wrong if you didn’t rely on yourself.
Member Since February 2011 - Comments: 3453 - Articles: 286
9:28 AM, 24th January 2017, About 9 years ago
I have just been reading up on the different types of mortgage on .GOV
>> https://www.gov.uk/government/publications/islamic-financing/practice-guide-69-islamic-financing
The three forms of contract are:
Ijara wa Iqtina
Diminishing Musharaka
Murabaha
This guide also discusses the emergence of the Islamic bond or sukuk market.
Revenue treatment:
Section 39 of the Finance Act 2010 provides for the tax treatment of certain credit sale, deposit and investment transactions (referred to in the legislation as “specified financial transactions”) which achieve the same economic result in substance as comparable conventional products. Although designed to cover certain Shari’a compliant structures, the legislation applies to any financing arrangement falling within the meaning of the term “specified financial transaction” regardless of whether the arrangement is, in fact, Shari’a compliant.
Effectively, the 2010 provisions treat the return arising on a specified financial transaction as interest for tax purposes and apply all relevant tax legislation pertaining to interest to that return. The legislation does not change the nature of the financial arrangements. It seeks to provide a level playing field for tax between certain types of economically equivalent, but differently structured, finance arrangements.
Member Since October 2013 - Comments: 1635 - Articles: 3
11:38 AM, 24th January 2017, About 9 years ago
Reply to the comment left by “Neil Patterson” at “24/01/2017 – 09:28“:
So, we can’t move to Shari’a compliant contracts to avoid s.24!
Member Since January 2016 - Comments: 473
3:04 PM, 24th January 2017, About 9 years ago
Points above taken on board – I thought it was too good to be true. Many thanks
Still, how sickening that the system is so broken that the ‘advice’ arm of HMRC, as funded by the taxpayer, does not know its own rules and HMRC is not bound by what it says, even in writing.
Member Since March 2014 - Comments: 195 - Articles: 1
4:14 PM, 24th January 2017, About 9 years ago
In my (very stressful) experience tax inspectors take the view that you are guilty until proven innocent and whatever advice their (in my long ago case via telephone) advisor has given is irrelevant. So beware.
Member Since January 2016 - Comments: 473
4:57 PM, 24th January 2017, About 9 years ago
Reply to the comment left by “Darlington Landlord” at “24/01/2017 – 16:14“:
It’s why I asked the question by webchat which I could record as opposed to telephone which could be denied.
A Sharia mortgage wouldn’t particularly suit me as the only BTL products available thus far are repayment-like.
Does this mean the rent to rent model is also hammered?
Member Since February 2011 - Comments: 3453 - Articles: 286
5:00 PM, 24th January 2017, About 9 years ago
Yes same tax regime.