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crazypabs

Shari’ah Loophole to Section 24 Taxation

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Saw this article this morning and it got me thinking, as I understand it (Muslim) Shari'ah law doesn't allow interest payments. So to get around this a number of banks have created Mortgage products which are rental agreements rather than mortgage interest.

If Section 24, and please correct me if I am wrong, doesn't allow Mortgage interest relief from April (albeit Tiered over the net few years), if these Shari'ah products are rent are they a loophole work around which will in fact allow the mortgage payments to be offset against rental income?

http://www.cpifinancial.net/news/category/consumer-banking/post/39306/demand-for-islamic-mortgages-at-all-time-high-in-uk

Quote

Demand for Islamic mortgages at all-time high in UK

Al Rayan Bank says the number of applications for its Home Purchase Plans (HPPs) and Buy To Let Purchase Plans (BTLPP) reached an all-time high in 2016 as demand for Islamic home finance continued to increase.

Demand, as measured by the volume of eligible enquiries to the bank, increased by nine in 2016 and has increased by 99 per cent in the last five years, indicating that Islamic banking has become a preferred method of property financing for a significant number of people.

Keith Leach Al Rayan Bank’s Chief Commercial Officer said, “In recent years we’ve worked hard to ensure that ethical, Shari’ah-compliant banking products are as accessible as possible to customers of all faiths. We’re therefore very pleased that our products, and Islamic banking in general, is clearly becoming an established part of British retail banking. There is still substantial room for growth in this market and we expect demand to continue to rise in the coming years.”

The increased demand for Islamic home finance is mirrored by an increase in the value of Shari’ah-compliant savings provided by Al Rayan Bank. Last year the value of Islamic savings, which are ethical profit sharing agreements that avoid interest, increased by 47 per cent compared with the previous year and by 449 per cent compared with 2012. Notably Al Rayan Bank believes that significant proportion of the increase has come from non-Muslim customers.

Al Rayan Bank estimates that 94 per cent fixed term deposit customers who joined the bank last year, and 26 per cent of all customers choosing to bank with it, are not of the Muslim faith.

 

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Deary me, that is terrible.

Islamic banks  have a duty to not encourage landlordism, feudalism, land hoarding at the expense of the wider populace and are actually designed to be anti-BTL.

I have never encountered a BTL Islamic Mortgage and I have good links as my Uncle wrote for Islamic Finance publications. I think he'll be aghast that this is classed as Islamic. If this article is true then it shows how deep financial selfishness has seeped.

Anyone interested in Islamic finance will find there is much common sense attached to it as it encourages real growth, shared risk and not the current abhorrent system. It's also completely opposite to the nutjobs currently given limeleight  to represent Islam in the press and in World Politics. You will also find exactly why historically, it has been seen as a real obstacle by the Western Bankers in gaining global dominance of the International Economy.; Well that and Russia.

Alas, it may well be that such ethical grounding has been washed away here too; Makes sense, what with the so-called Islamic Oil-rich states hoarding wealth whilst people die of war and starvation. 

 

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There are big problems with not lending with interest.  

To give anyone whatever they're looking to borrow, for major investment/purchases, without some risk-and-reward premium for the lender.

The lender has nothing to gain and everything to lose.

 

Can't help but notice all those on collective-funding sites, outside of main banking, are all individuals looking for good % returns as well for their 'loans' - choosing to take risk, and play banker.

46 minutes ago, hotairmail said:

The argument against that is that in the USA those states with non recourse loans and recourse loans showed no difference in lending standards. I think what that tells us is that the individual employee who is making the loan must somehow be tied in to the eventual outcome of the loan as though it was their money.

Not sure how it is today, but going further back in time, as best I understand it, it was because smaller regional banks could offload risk/loss/huge losses, back onto the US taxpayer, and have a party during the boom times.

 

3 hours ago, Tapori said:

Islamic banks  have a duty to not encourage landlordism, feudalism, land hoarding at the expense of the wider populace and are actually designed to be anti-BTL.

Agreed Tapori.   As I understand it, debt/lending back in ancient times caused megapolitical weakness.  Core group of rich powerful people (eg BTLers & Bankers & other Oligarchs) who seized the lands and properties of those who had not been able to keep up with their debts.  (Although interest rates tended to be very high).  

Borrowing destabilised the system.   When invasion came in, there were too few people who had any interest in pushing back against the invaders.  

No stake in society.   Freemen who had been outed with ever smaller core of rich people, actually welcomed the invaders (or different new regional leaders with armies), who promised change (after seizing the rich people's assets and taking over, then sharing a bit more back with society, and tightening lending laws so that they would have an ever stronger group of followers with a stake in society).    Although it's gone too far in UK with core of BTLers and long-wave HPIers, and HPI chasers with big debt on the margin.  HPC them.

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Somebody made precisely this enquiry on P118 the other day in a new thread. 

Under UK law, the interest equivalent payments are treated as interest in a legal sense. 

On this point, HMRC and Allah do not see eye to eye. 

Edited by Ah-so

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4 hours ago, Ah-so said:

Somebody mace precisely this enquiry on P118 the other day in a new thread. 

Under UK law, the interest equivalent payments are treated as interest in a legal sense. 

On this point, HMRC and Allah do not see eye to eye. 

:lol:

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