Launching the consultation, the UK tax authority explained that:

"The Government is keen to promote the growth of the alternative finance market in the UK. In order to achieve this it is necessary to deal with certain tax barriers preventing the development of the industry. "

"The tax treatment of the issue of a sukuk based upon Sharia'a compliant financial products is in some areas uncertain and in others produces anomalous results. These anomalies can put providers of Sharia’a compliant products at a commercial disadvantage. This particular measure addresses Stamp Duty Land Tax (SDLT) barriers to issuing sukuk."

It went on to add that:

"There are two policy objectives for Islamic finance. For business we wish to establish London as a gateway for international Islamic finance. For individuals, we wish to ensure that everybody, irrespective of their beliefs, has access to competitively priced financial products and that there is equal taxation of these products. Sukuk issuance (Islamic bonds) can help achieve both of these objectives."

Commenting on the policy options being considered with regard to creating designated tax rules for sukuk offerings, HMRC revealed that the two key options under consideration were either to do nothing, or to provide a framework to enable a sukuk market to develop in the UK. It suggested that:

"Choosing the first would mean missing opportunities to develop Islamic finance in the UK, including addressing SDLT barriers to business and would allow tax inequality of alternative finance products to continue."

"The second option is preferred. The clarification of tax rules will encourage the development of the alternative finance industry. A competitive market in these products could substantially benefit London as a global financial centre, generating further investment."

An impact assessment has been published alongside the consultation. Responses are invited on the matter until 18th August.