Background Note
107.The Government has already introduced legislation enabling the provision of alternative methods for individuals or business to finance a property purchase, deposit money in a bank and borrow money from a financial institution. The focus has now moved to the issue of alternative finance investment bonds based on real property.
108.Interests in land or property as the underlying asset may often back bonds. In a normal securitisation, the investor does not have a direct ownership in the underlying asset but merely an interest-bearing certificate. With alternative finance investment bonds, however, the investors own part of the underlying asset. This necessary change in ownership of the underlying asset may involve SDLT, tax on capital gains and capital allowances issues.
109.To provide similar tax outcomes for alternative finance products to their equivalent conventional finance products, no SDLT or tax on capital gains should be charged when the land is sold to the issuer of the alternative finance bonds and no SDLT or tax on capital gains charged on the sale back of the property to the originator at the end of the bond term. In addition the position of alternative finance bond-holders will be clarified to ensure that SDLT does not arise on the acquisition or transfer of an alternative finance bond certificate. The originator should also be able to claim any CAs on the asset during the term of the bond.
110.These new provisions address certain tax barriers to ensure that the cost of issuing an asset based alternative finance investment bond is equivalent to conventional equivalent financial product.
