TISA applauds Government’s move to broaden the range of Shari’a compliant bonds (‘sukuk’) recognised under UK legislation
The Finance Act 2007 has expanded the range of qualifying investments for the purpose of recognising ‘alternative finance investment bonds’ (Shari’a-compliant financial instruments commonly known as ‘sukuk’). TISA welcomes the UK Government’s leadership in the quickly expanding the field of Islamic Finance.
TISA is pleased to confirm that it has received confirmation from HMRC that sukuk is regarded as falling in the same category as conventional corporate bonds for the purposes of UK savings scheme legislation. This means that sukuk will, in principle, be a qualifying investment for ISAs and CTFs subject to satisfactory listing requirements and, for ISAs, meeting the five year requirement.
Tony Vine-Lott, TISA Director General, said:
“We are very pleased with the action that HM Treasury has taken on sukuk instruments as this further reinforces the UK’s position as one of the leading centres for Islamic Finance in the world. The latest developments– amendment to the Finance Act 2005 to recognise sukuk and broaden the range of Recognised Stock Exchanges for this purpose – is only the latest in a series of constructive measures in this area and demonstrates the intent to make the UK an inclusive society at all levels. We are extremely pleased that the Government has given us clarification that these assets will be allowed in Government savings schemes.”
For more information:
Tony Vine-Lott, TISA Director-General
07790 006108
Peter Shipp, TISA Technical Director
01642 207207
Jacob Coy, Cicero Consulting
020 7665 9530
079 0039 2531
NOTES TO EDITORS:
Section 48A(3) Finance Act (FA) 2005 requires ‘alternative finance investment bonds’ (Shari’a-compliant financial instruments commonly known as ‘sukuk’) to be listed on a recognised stock exchange. An alternative finance investment bond listed on an exchange recognised under section 1005 ITA will meet this requirement.
In addition, certain other exchanges are designated only for the purposes of section 48A FA 2005. An alternative finance investment bond listed on such an exchange will meet the listing requirement in section 48A(3) FA 2005, but the exchange is not a Recognised Stock Exchange for any other purpose. Designation has effect from 1 April 2007.
Recognised Stock Exchanges: http://www.hmrc.gov.uk/fid/rse.htm
Exchanges listed solely for the purpose of the sukuk legislation (s 48A FA 2005 as inserted by s 53 FA 2007):
• Abu Dhabi Securities Market
• Bahrain Stock Exchange
• Dubai Financial Market
• Dubai International Financial Exchange
• Labuan International Financial Exchange
• Saudi Stock Exchange (Tadawul), and
• Surabaya Stock Exchange
For sukuk to qualify to be held in an ISA or CTF, it must (in common with any corporate bond) be listed on a fully-recognised stock exchange or, alternatively be issued by a company whose shares are so listed or by a company which is a 75% subsidiary of such a company.
This means that a sukuk bond listed on, for example, the Bahrain Stock Exchange is now recognised as a qualifying investment under the Finance Act, but may not qualify as a qualifying investment for ISAs and CTFs.