I warmly welcome you back to the Chair, Mr. Illsley.
The clause is part of a package of measures to help Islamic finance. We have been working with the industry to remove the barriers to Islamic finance products and have made a good deal of progress. The clause provides a new tax framework for sukuk, which allows sukuk to be issued, held and traded as conventional securities. Sukuk is a sharia-compliant form of securitisation. As members of the Committee will know, in a conventional securitisation, investors purchase bonds and receive interest on their investment, backed by an asset such as a mortgage book as security. In sukuk, however, investors purchase a share of the underlying asset, and their return is in the form of a proportionate share of the income from the asset, so in a sukuk backed by a sharia-compliant mortgage book, investors receive a share of the payments made by the property owners. Sukuk can be backed by any income-producing asset, but clause 74 concerns only sukuk backed by a sharia-compliant mortgage book.
In the case of stamp duty land tax, we recognise that taking and receiving interest is prohibited by sharia law. That has led to the growth of alternative financing mechanisms. Our current taxation system—or the system as it was before we started to change it—has occasionally inadvertently hampered those new mechanisms. Islamic financing of home purchases has grown by 40 per cent. in the past year alone, so we are opening up important new commercial opportunities.
The UK is the only country in the European Union that currently offers Islamic mortgages. Sultan Choudhury, director of sales at the Islamic bank of Britain—whose East Ham branch I was pleased to open last year—said that this Government’s initiatives have been
“the UK is now more efficient on a tax basis for Islamic finance than many Muslim states”.
I am grateful that the series of changes that we have made has been welcomed on both sides of the House. I am sure that this clause will equally be welcome to all members of the Committee.