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For the latest New Developments, see ND.2597 and ND.2751

Very broadly, the tax treatment for alternative finance returns is such that the returns are treated as interest. The legislation addresses three contracts that give rise to alternative finance return — a purchase and resale, a diminishing shared ownership and an alternative finance investment bond (AFIB). These are described in more detail below.

So, for individuals, the relief for interest paid rules apply to alternative finance arrangements as if the arrangements were loans and the alternative finance return were interest.

For companies (in relation to purchase and re-sale and a diminishing shared ownership arrangement), the loan relationships regime has effect in relation to the arrangements.

For an alternative finance investment bond, the overall approach is that the rights of the bond holder (normally expressed in the form of sukuk certificates) are treated for tax purposes as if they were debt securities giving rise to interest income.

For details see B5.602C.