Question to the HM Treasury:

To ask His Majesty's Government what assessment they have made of the disparities between conventional and Sharia-compliant mortgage products in respect of the imposition of capital gains tax.

The government is aware of a difference in tax treatment when a commercial or residential property is refinanced using alternative rather than conventional finance methods. In these situations, a capital gains liability may arise for those using alternative financing, when this would not have been the case for those using conventional financing. The refinancing of main homes is unaffected as Private Residence Relief (PRR) applies.

On 16 January 2024, the government published the Tax Simplification for Alternative Finance consultation to seek views on reforms that would address the capital gains issue. The consultation closed on 9 April 2024 and all responses will be carefully considered and a summary of responses will be published in due course together with details of the next steps.