Income Tax Act 2007 section 372C

Deposit arrangements

Section 372C explains how alternative finance deposit arrangements are treated for the purposes of the tax avoidance rules in Part 7 of the Income Tax Act 2007, by deeming them to be equivalent to conventional loan arrangements.

• When a person deposits money with a financial institution under a Sharia-compliant or other alternative finance deposit arrangement, the deposit is treated as a loan made by the depositor to the institution
• The loan amount equals the money deposited, and if the deposit is made in instalments, each instalment is treated as a drawdown of the loan
• The outstanding capital on the deemed loan equals the balance of the repayable deposit, and any repayment of the deposit counts as repayment of the loan
• The beneficial owner of the loan is the person entitled to repayment of the deposit, and disposing of the right to repayment of the deposit is treated as disposing of the loan