FSCS protection - Sharia accounts

Daliah

eskbanker said:

Aretnap said:

wmb194 said:

It's all sophistry: expected profit is interest. These are normal deposit accounts and, precisely the same as any other savings account, you declare your 'profit' to HMRC as interest. 

Can't remember who said it but:

You might persuade God that it's not interest, but the taxman is not so easily fooled.

I've reposted it a few times but to the best of my knowledge it was @poppy10_2 who first posted the elegant phrase "Allah won't class it as interest but HMRC will":

https://forums.moneysavingexpert.com/discussion/comment/75688627/#Comment_75688627

Whilst this is very true, it isn't the HMRC which guarantees deposits. I think it is likely that the FSCS would include expected profit in the compensation payment, as it is likely (FSCS words) that it would include interest. But there is nothing on the FSCS site that actually says so.

skray

Thanks for all the responses. I once checked the T&C of a Sharia Product of Habib Bank - it went like this

"If we believe that the Expected Profit Rate might no longer be achievable, we shall inform you and may offer you a revised (lower) Expected Profit Rate. In such case, you will have the option to either accept the revised Expected Profit Rate or request the termination of the Account where you shall become entitled to receive the deposited funds and any profit accrued up to the termination date. If we reasonably believe, at any point of time, that the deposited funds are at risk of being lost, we will close the Account immediately by returning the full Deposit amount, together with accrued but unpaid profit to your nominated account. If your Deposit returns a loss, we shall, as per the UK banking regulations, offer to compensate you for any losses you have suffered by returning your Deposit to you in full. You are entitled to accept or refuse this offer from us....."

I think this is called a "Make Good" offer. If the offer of compensation is accepted the investment will probably cease to be a Sharia Account - but FSCS protection will kick in.
But if the customer wishes to stay withinn the bounds of Sharia principles he might have to opt out of this offer.

I once posted a query at taxationweb "Self Assessment - Tax Treatment for Fixed Deposit Expected Profit Rate" - sorry I am yet allowed to paste a link at MSE forum yet.