HMRC invites responses on new proposals to introduce sharia’a compliant bonds
HMRC has published a consultation document on its proposed legislative framework under which commercial “sukuks” (an Islamic finance certificate which is the Sharia’a equivalent of bonds) could be issued in the UK. The consultation document was published in late June, with a deadline for comments by 18 September.
Currently the administrative requirements of Sharia’a finance law involves holders, issuers and traders of sukuks in extra payments of Stamp Duty Land Tax which are not incurred by their counterparts with ordinary corporate bonds. The new legislation aims to provide a relief for these extra liabilities, and the consultation particularly seeks information on whether the proposed relief meets the requirements of industry, what additional costs might arise as a result of complying with the relief and whether it is sufficiently flexible for future development of the market.
This consultation is part of an ongoing process by which the government hopes to meet its stated objectives for Islamic finance: to establish London as a global gateway for Islamic finance and to ensure that all British citizens, regardless of their faith, have access to competitive financial services. Previous changes to tax law have made allowances for Sharia’a-compliant mortgages, the Islamic financial concept of ljara wa lqtina, a lease-based mortgaging system, and Mudaraba and Murabaha arrangements (equivalent to respectively deposits and loan financing).