Treasury rewriting Britain's tax laws to accommodate Sharia finance

THE Treasury plans to rewrite Britain's tax rules to usher in a new wave of Sharia law for the country's financial system.

The one-line revelation is buried in the 212-page pre-Budget report.

It is among a string of startling details which barely merit a mention in Alistair Darling's controversial mini-Budget - prompting fresh accusations that Labour is "burying bad news".
The Government wants to tap into the fast-growing Sharia finance market, set to top £205billion a year, and turn London into the "global gateway for Islamic finance".

Many conventional financial products are not Sharia compliant because Muslim clerics view conventional loans, which involve interest payments, as sinful.

The UK Government was one of the first Western countries to issue a state-backed sukuk, an Islamic bond. It now wants to rewrite tax laws to stop Muslim businessmen being unfairly taxed when they try to raise money on their companies.

Conventional loans allow them to take equity out of their business, using the property as collateral, but to be Sharia compliant a Muslim "sells" the business to the bank and then rents it back. That leaves the businessman facing a bill for capital gains tax and the Treasury wants to level the tax playing field.

Mohammed Amin, head of Islamic finance at PricewaterhouseCoopers, said: "The UK has become the leading Western country in Islamic finance by taking a series of measures to ensure that Islamic finance is taxed no worse and no better than conventional finance.

"The pre-Budget report continues this progress by including measures to equalise the tax treatment of property refinancing transactions." Ministers are also considering issuing Government bonds to Islamic banks to help them comply with new financial regulations....