Question to the HM Treasury:

To ask the Chancellor of the Exchequer, if she will make an assessment of the potential merits of bringing the tax regulations for Sharia-compliant mortgages in line with conventional mortgages.

The Government is committed to the continued strength of the UK Islamic Finance sector, both as an important part of the UK’s overall financial ecosystem and as an instrument of financial inclusion.

The alternative finance tax rules aim to provide a level playing field for tax purposes across alternative and conventional financing arrangements.

On 16 January 2024, HM Treasury published a consultation proposing changes to the Capital Gains Tax (CGT) rules that apply to alternative finance arrangements. The proposed changes seek to amend those rules so that where property is used as collateral for the purposes of raising finance, the CGT outcome is the same whether alternative finance or conventional finance is used. The consultation also asked whether there are any implications for capital allowances. The consultation closed on 9 April 2024 and the Government is considering responses. Next steps will be set out in due course.