Taxation of Chargeable Gains Act 1992 section 151K

Diminishing shared ownership arrangements: initial acquisition

Section 151K defines the qualifying conditions for "diminishing shared ownership" alternative finance arrangements — a structure commonly known as Diminishing Musharakah — where a financier and a customer jointly acquire an asset and the customer gradually buys out the financier's share.

• A financier (which must be a financial institution, a regulated home purchase plan provider, or party to a regulated peer-to-peer lending arrangement) and a customer each acquire a beneficial interest in the same asset.
• The customer makes two streams of payments to the financier: capital payments that in total equal the cost of the financier's beneficial interest (gradually buying it out), and separate payments for the customer's exclusive right to occupy or use the asset.
• The customer has exclusive use of the asset and is exclusively entitled to any income, profit or gain from it — including any increase in value — although the financier may bear responsibility for, or share in, any fall in the asset's value.
• The customer may grant interests or rights over the asset to third parties, provided the grant is not to the financier or a person connected with the financier through control, and is not required by the financier or the wider arrangements.