VAT - Islamic finance
The measure
There has been significant discussion for some time on the potential differences between the VAT treatment of Islamic finance products and 'conventional' financial services. In today's PBR, the Government has restated its aim to try to ensure that VAT does not impede the uptake of Islamic finance products within the UK retail market. Government has also taken this opportunity to emphasise its commitment to clarify the VAT treatment of sukuk (Islamic bonds).
Who will be affected?
UK Islamic retail and investment banks, and 'conventional' financial services businesses which offer or transact in Islamic finance products.
When?
Discussions have been underway in this area for some time. This measure does not commit to a timeframe for completion of this work.
Deloitte has been working closely with HM Treasury, HMRC and the Islamic finance
industry to resolve VAT issues in this area.
These measures should achieve the following:
- products with the same economic objectives will be treated the same for VAT purposes; and
- one of the impediments around the issue of a sukuk within the UK should be removed.
As a result, this statement is to be welcomed as it demonstrates Government's commitment to resolution in this area. It should also help provide more certainty within this market generally.
