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HMRC internal manual

Community investment tax relief manual

HM Revenue & Customs
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Alternative finance arrangements (AFAs): Introduction


The (CITR) scheme is based around qualifying investments being made in community development finance institutions (CDFIs) who then onward-invest the funds raised by making relevant investments in qualifying enterprises.

The range of qualifying investments (CITM4010) and relevant investments (CITM3030) is limited to investments that take the form of loans, securities or shares. So financial arrangements that in substance are akin to such instruments but which take some other legal form would not (without special provision) fit within the scheme.

In some areas of tax it is the substance of a financial arrangement that takes precedence over its form in determining the tax treatment. In particular, FA05/s46 57 provide that a number of financial arrangements that comply with the principles of Sharia’a law (AFAs) are taxed in a similar way to their conventional counterparts for certain purposes.

FA05/s54A (inserted by Treasury Order SI2008/1821) extends that treatment to the CITR scheme. It provides that certain AFAs that replicate the effect of investments or loans at interest are to be treated as if they were “loans” for all CITR purposes.

CITM4320 Details of the type of AFAs that are treated as “loans” for CITR purposes
CITM4330 - CITM4360 Explain how the CITR rules are modified to accommodate AFAs

There is further guidance on alternative finance at CFM4400 and SAIM2250.