Foot Anstey’s Islamic Finance team advises Nester on proposed peer2peer legislation in the UK
National law firm, Foot Anstey LLP, has advised Nester Holdings on the impact of proposed legislation on peer2peer lending by the UK government.
In November 2021, the UK government proposed bringing Shariah-compliant peer-to-peer lenders within the scope of the “alternative finance” tax rules, which aim to bring the tax treatment of Shariah-compliant financial products into line with conventional financing, so those investing via Shariah-compliant products are not disadvantaged.
Nester is an online peer2peer (P2P) financing platform helping users invest and discover new real estate investment opportunities. Foot Anstey has supported Nester since its inception in 2018 and has completed numerous peer2peer financing transactions for Nester, supporting its property investor and developer customer base.
Jos Style, senior associate at Foot Anstey, was part of the team that advised Nester on the proposed legislation, he commented: “We were asked by Nester to look at the draft Order. We reviewed the rules to determine whether the rules allowed Nester to offer a peer-to-peer lending product within an ISA wrapper, something now permitted by the ISA regulations for conventional finance. ISAs of course allow individuals to save and invest tax-free.
“We identified that, whilst the rules were satisfactory in generally maintaining equivalent tax treatment for Shariah-compliant peer2peer financing, the tax breaks granted to conventional ISAs with a peer2peer component had not been extended to Shariah-compliant peer2peer lending. As a result, it was not possible for Nester to offer the Shariah-compliant peer2peer ISA within the scope of the draft Order.
“We therefore made representations to HMRC on Nester’s behalf explaining the issue and suggesting amendments to the ISA Regulations that would achieve the government’s objective. Since this, we have heard back from HMRC which confirmed that it accepts that the draft Order does not operate as intended, and it will be legislating to amend the ISA Regulations to address this issue.”
Youness Abidou, founder and CEO at Nester, said: “Nester is at the forefront of innovating the Islamic Finance sector using technology to enable investments and financing for the Muslim community. The provision of a platform that offers these solutions and the development of the technology that supports this provision is only part of the journey for Nester.
We continue to work alongside Foot Anstey’s team to make changes to laws that are restrictive in the face of this innovation and which continue to be critical in the development of Nester as a business and the Islamic Finance sector in general.”
