Taxes Consolidation Act 1997 section 267Q

Treatment of deposit return

Section 267Q sets out the tax treatment of deposit returns arising from Shari'a compliant deposit transactions structured as Mudaraba or Wakala contracts.

• A deposit return from a Shari'a compliant deposit transaction is treated for all tax purposes as if it were relevant interest paid on a deposit of money.
• Deposit interest retention tax (DIRT) applies to the deposit return in the same way as it applies to interest on a conventional bank deposit.
• The relevant deposit taker is not regarded as carrying on a trade in partnership with the depositor merely by virtue of the deposit arrangement.
• The treatment is subject to section 130, which means a deposit return that resembles a distribution rather than interest will not qualify for treatment as interest.