New Islamic finance peer-to-peer lending platform Nester has lobbied HMRC to change its tax rules to allow it to launch a Shariah-compliant Innovative Finance ISA (IFISA).
Founder and chief executive Youness Abidou said his platform approached HMRC with a draft amendment to its tax laws to accommodate Islamic finance in P2P lending and allow Nester to launch an IFISA.
Nester provides buy-to-let, refurbishment and bridge financing for corporates and offers investors returns of up to nine per cent, secured on UK property.
Abidou wants the platform’s Shariah-compliant profit treated as interest, so that it effectively benefits from the same type of treatment as the conventional interest-based IFISA.
On 11 February, HMRC launched a consultation on draft regulation, which will widen the scope of the tax legislation applying to alternative finance arrangements. The consultation closes at 11:45pm on 11 March 2022.
Abidou said once HMRC makes the relevant tax changes into law, Nester will launch its IFISA.
“We’re in the process of lobbying HMRC to accommodate changes in tax laws that currently work for Islamic banks but because of the journey of tech development, did not contemplate fintechs operating in this industry and using the types of products we have,” he said.
“We approached HMRC with a proposed amendment which was announced in its draft statutory rules announced on 11 February. HMRC has acknowledged Nester and Article 36H businesses should benefit from alternative investment tax laws, laws which accommodate Islamic finance for banks.
“Once HMRC puts that statutory rule into law, it will hopefully trigger a number of dominoes that will allow us to offer ISAs. We’re looking to launch an IFISA off the back of the current consultation with HMRC. We’ve built the system to allow us to do so.”