SDLT: alternative property finance relief and musharaka—FA 2003, s 71A
Produced in partnership with Sarah Squires of Old Square Tax Chambers
SDLT: alternative property finance relief and musharaka—FA 2003, s 71A

The following Tax practice note produced in partnership with Sarah Squires of Old Square Tax Chambers provides comprehensive and up to date legal information covering:

  • SDLT: alternative property finance relief and musharaka—FA 2003, s 71A
  • Why is SDLT relief needed for musharaka over land?
  • SDLT Manual not up-to-date
  • Effect of the SDLT relief under FA 2003, s 71A
  • Relief must be claimed
  • Conditions for relief under FA 2003, s 71A
  • Conditions for relief relating to the APFA
  • Conditions for relief relating to SDLT compliance
  • SDLT consequences of the first transaction
  • Exemption from SDLT charge in limited circumstances
  • More...

A musharaka is a form of Islamic financing that operates as a form of shared ownership arrangement. It can be used as a Shari’a-compliant alternative to acquiring land using a mortgage (see an example below at: SDLT consequences of the first transaction) or as a way of refinancing an existing loan secured over land. For more information on musharaka, see Practice Notes:

  1. Musharaka—tax consequences of diminishing shared ownership arrangements—what is musharaka?

  2. Structure of a musharaka transaction, and

  3. The structure and elements of a musharaka transaction

Where land is situated in England or Northern Ireland, the stamp duty land tax (SDLT) relief that is most relevant to a musharaka is set out in section 71A of the Finance Act 2003 (FA 2003) (land sold to a financial institution and leased to another person).

This Practice Note:

  1. outlines the conditions for relief under FA 2003, s 71A

  2. illustrates the application of this relief by reference to a musharaka structure, and

  3. is written on the assumption that:

    1. the only asset owned under the musharaka is land situated in England or Northern Ireland, and

    2. the eventual owner is not a first-time buyer of residential property—there is a specific relief for this in FA 2003, s 57B and Sch 6ZA

Since 1 April 2015, any land transaction involving an interest in or over land in Scotland has been subject to land and

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