Firms involved in Islamic finance are lobbying the British government for tax reforms, arguing that the treatment of some sharia-compliant structures is hindering their growth.
Britain has actively pursued Islamic finance to become the Western world's biggest hub for it and banks are now seeking to ensure tax parity in areas such as mortgage refinancing as they compete head-on with their conventional peers.
Islamic finance forbids interest payments and transactions often require multiple title transfers of underlying assets, which can trigger double or even triple tax charges.
More than 20 firms, including Gatehouse Bank, Bank of London and The Middle East, Abu Dhabi Islamic Bank and Qatar Islamic Bank, offer Islamic financial products in Britain
lobby group TheCityUK said.The country has previously addressed the adverse tax treatment for Islamic bonds and residential mortgages, helping Islamic banking assets reach more than $5 billion pounds in 2016, while London has attracted over 65 listings of Islamic bonds worth a combined $48 billion,
But this has created concerns over refinancing mortgages or switching them from a conventional to an Islamic bank, which can trigger capital gains taxes, said Samir Alamad, head of sharia compliance and product development at Birmingham-based Al Rayan Bank, which is owned by Qatar's Masraf Al Rayan.
he added."This is the more pressing issue as it is affecting Islamic banks and their customers," said Alamad, one of those lobbying British tax authorities. Taxes on investment property and commercial finance also need clarification.