Sukuk—investment bond arrangements and UK VAT
Produced in partnership with Etienne Wong of Old Square Tax Chambers
Sukuk—investment bond arrangements and UK VAT

The following Tax guidance note Produced in partnership with Etienne Wong of Old Square Tax Chambers provides comprehensive and up to date legal information covering:

  • Sukuk—investment bond arrangements and UK VAT
  • Structure of sukuk issuance
  • VAT characterisation of sukuk—form versus substance
  • VAT analysis of sukuk as dealing in the underlying property
  • VAT analysis of sukuk as conventional bonds
  • VAT analysis of sukuk as interests in a collective investment scheme
  • Normal VAT principles apply to supplies of sukuk trust property
  • Who makes supplies in relation to the trust property?
  • Sukuk-al-ijara
  • Sukuk where the trust property is land

This Practice Note outlines the UK VAT treatment of the issue of a sakk by an issuer to an investor (or sakk holder).

A sakk is a certificate that confers certain rights on the holder to receive payments from time to time. Its key characteristics are comparable to those of a bond (or similar financial instrument).

‘Sukuk’ is the plural of ‘sakk’.

A sukuk issuance is a form of Islamic financing. For more information on Islamic financing generally, see Practice Note: Key principles of Islamic finance.

For more information on other (non-VAT) tax aspects of sukuk, see Practice Notes: Sukuk—investment bond arrangements and their UK direct tax treatment, Sukuk—investment bond arrangements and stamp duty and SDRT and Sukuk al ijara—tax reliefs for sale and leaseback arrangements.

This Practice Note is written on the assumption that:

  1. the issuer is a corporate special purpose vehicle

  2. both the issuer and the sakk holder belong in the UK for VAT purposes in relation to the sukuk issuance

  3. any trust property held by the issuer that constitutes land, or goods for VAT purposes, is situated (and remains) in the UK, and

  4. each transaction entered into by the issuer or the sakk holder is with a counterparty who belongs in the UK for VAT purposes in relation to that transaction

For more information on the concept of belonging for VAT purposes, see Practice