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OVER RECENT YEARS London has developed into a major centre for Islamic finance while Islamic finance has grown rapidly into a major new source of finance for all types of UK businesses.
However the Koran prohibits Muslims from the practice of 'riba' which is generally understood to be the payment or receipt of interest. As a result of this the Muslim community has developed alternative finance arrangements that do not carry interest but do give a financial return. As these financial products are very different from traditional UK financial products this has led to confusion over the correct taxation treatment. In order to clarify the tax treatment of these arrangements the alternative finance arrangements legislation was introduced in FA 2005 and this was then extended in
FA 2006.
The purpose of the alternative finance legislation is to bring the taxation and...
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