Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017 Schedule 10 paragraph 2

Alternative property finance: land sold to financial institution and leased back to individual

Schedule 10 paragraph 2 provides LTT relief for a sale-and-leaseback arrangement between an individual and a financial institution, commonly used in Sharia-compliant property finance where the payment of interest is not permitted.

• Where a financial institution buys a property (or a share of it) and leases it back to the individual under an alternative finance arrangement, up to three transactions can qualify for LTT relief: the institution's purchase, the lease-back to the individual, and the eventual transfer of ownership back to the individual.
• The institution's purchase is relieved from LTT where the seller is either the individual themselves or another financial institution that previously held the property under the same type of arrangement with that individual.
• The lease-back to the individual is relieved provided all LTT obligations relating to the institution's purchase have been met, including payment of any tax due on that purchase.
• The eventual transfer of the property back to the individual is relieved provided all LTT obligations on the earlier transactions have been met, the institution has continuously held the property interest, and the individual has continuously held the lease throughout.