DAR AL HARB-U.K.: A LOOPHOLE FOR ISLAMIC FINANCE IN BRITAIN TO BE CLOSED

Chancellor Alistair Darling to close loophole in finance deals based on Sharia
by James Rossiter

The Chancellor is expected next week to close a loophole in Sharia finance rules that have allowed commercial property investors to avoid paying stamp duty on more than £1 billion of deals, The Times has learnt.

Alistair Darling is expected to tighten the rules on mortgages that comply with Sharia – or Islamic law – in his inaugural Budget after commercial property developers discovered a quirk in the legislation that allowed them to escape stamp duty. The Government brought in changes to the stamp duty regime three years ago amid concern that homeowners opting for Sharia-compliant mortgages were paying stamp duty twice.

The 2005 Budget brought in measures to correct this anomaly but inadvertently created a tax avoidance opportunity that property developers have rushed to exploit. More than £1 billion of commercial property deals over the past two years have escaped stamp duty at 4 per cent.

Peter Beckett, the tax director for Ernst & Young, said: “This loophole has existed since 2005 but has been used more widely following the closure of previous stamp duty tax planning schemes.”

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1) Chancellor Alistair Darling to close loophole in finance deals based on Sharia