Land and Buildings Transaction Tax (Scotland) Act 2013 Schedule 8 paragraph 4

Status of bond-holder and bond-issuer under alternative finance investment bonds

Schedule 8 paragraph 4 clarifies how the bond-holder and bond-issuer under an alternative finance investment bond are to be treated for LBTT purposes, ensuring that standard property ownership and trust rules do not inadvertently apply to these arrangements.

• An alternative finance investment bond is a Sharia-compliant structure where an investor (the bond-holder) funds a financial institution (the bond-issuer) which acquires and manages assets on their behalf.
• For LBTT purposes, the bond-holder is not treated as having an interest in the underlying bond assets, even though the bond-holder has an economic stake in those assets.
• The bond-issuer is not treated as a trustee of the bond assets, even though it holds and manages them for the benefit of the bond-holder.
• These rules prevent double or unintended LBTT charges that might otherwise arise if the bond-holder were regarded as owning an interest in the land or the bond-issuer were regarded as holding it on trust.