The Government has underlined its commitment to the Islamic finance sector, promising to examine the possibility of a sovereign sukuk as well as a consultation on stamp duty tax relief on alternative finance investment bonds.
According to Norton Rose tax partner John Challoner both points, when enacted, will give a considerable boost to the UK’s Islamic finance initiative.
“Last year saw legislation which permits UK companies to issue sukuk, which are equivalent to Islamically-compliant bonds,” said Challoner. “The legislation, however, did not extend to removing the stamp duty land tax charges which would make sukuk uneconomic where the assets underlying the bonds are UK land and buildings.”
For Rahail Ali, global head of Islamic finance at Lovells, the Budget announcements reinforce the UK’s desire to be pivotal in the wholesale Islamic finance sector. And, while nothing concrete was announced by the Chancellor Alistair Darling, Ali feels a more reserved position during current market conditions is sensible.
“The fact that the UK sukuk is still up for active deliberation, even in these sub-prime times, reflects well on the UK and the City in particular. The overall positive theme will not be lost on investors, particularly GCC investors, with deep pockets and ethical adherents,” said Ali.
“The measures to support Islamic finance in the UK by providing relief from SDLT for sukuk or Islamic commercial paper and emphasis for regulations is also indicative of the UK’s level playing field – no obstacles, no favours, and an enlightened approach to Islamic finance. It’s a very good stance for attracting a wider profile of investors and at the same time displaying clear blue water from other financial centres.”
For reactions to the non-dom provisions in the budget click here