In order to further promote the City of London as a centre for global Islamic finance and level the playing field between conventional and Islamic products (referred to by the legislation as alternative financing instruments), today the UK Government announced in the UK Budget 2009 statement the following three further measures on alternative finance as part of the ongoing drive to promote the UK as a centre for Islamic finance.
- Provision of relief from stamp duty land tax (SDLT) in respect of transactions undertaken as part of the issue of alternative finance property investment bonds;
- provision of relief from tax on capital gains in respect of transfers of land to and from sukuk issuance vehicles; and
- ensuring that the person obtaining the financing will continue to be entitled to claim capital allowances while the land is held by the sukuk issuance vehicle.
Angela Savin, Senior Associate in the Norton Rose LLP tax department comments “For the last few years, HMRC have been very receptive to representations made for the tax treatment of Islamic Finance to be no more onerous than conventional finance. These changes should ensure that there are now no UK tax obstacles to issuing sukuk backed by UK land.”
Davide Barzilai, Partner in the Norton Rose LLP Islamic Finance Group added, “These tax changes will give a considerable boost to the UK Islamic Finance initiative and ensure that in these difficult times alternative sources of finance will be available in the UK”.