Written by: Amina Zelić
The countries of England, Scotland, Wales and Northern Ireland, known as the United Kingdom or Great Britain, represent the most economically developed parts of Western Europe with a population, according to the 2017 census, of 66.04 million. It is estimated that over three million of that number are Muslims.
The freedoms that Muslims, as a minority, currently enjoy in Great Britain are large and progressive compared to other countries in Western Europe, and even Europe in general, and they relate to rights from the educational system as well as some personal rights. For example, in this country there are sharia courts for matrimonial disputes or some business disputes which of course do not operate independently of the laws in force in this country and do not represent a parallel independent judicial system. Also, there are several dozen Islamic primary and secondary schools, which is a rare practice in other Western countries.
Therefore, the opportunity given to Islamic financial institutions in this financial market is not surprising. Namely, today Great Britain is one of the leading countries in the world in terms of the inflow of foreign investments into the Islamic finance sector, and London is growing into a world center for Islamic banking and finance, strongly supporting the development of the concept of interest free banking.
Islamic finance first appeared in the UK shyly in the 1980s when Sharia-compliant transactions were carried out on the London Metal Exchange to provide liquidity to institutions and other Middle Eastern investors who were developing wholesale in the UK. This was of course insufficient to satisfy the appetites of all investors and markets, but it was a start.
The next laudable step took place in 1995 when the then governor of the Bank of England called on Islamic bankers, financiers and investors to make London and Great Britain the world center of Islamic finance while promising that the Bank of England and the British government would provide every kind of support to the development of Islamic finance. of finance.
However, several years have passed since this, one might say, historic call, through the formulation of requests for the adjustment of legislation to the first concrete moves in practice. Thus, at the beginning of the 21st century, more precisely in 2001, a working group was formed with political representatives of Great Britain and the Muslim community, with the aim of removing barriers to the development of Islamic finance in Great Britain. The reasons for this concrete and accelerated action were of a rational economic nature, and two stood out. The first is that the Labor government, led by Tony Blair as Prime Minister and Gordon Brown as Chancellor of the Exchequer, sought to improve the socio-economic picture by including British Muslims, some of whom lived in economically disadvantaged areas. The second reason was of a purely economic nature. Namely, adapting the existing legal and regulatory framework to Islamic finance would potentially increase the arrival of investors from the Gulf countries to Great Britain, and especially to London, which would enable London to realize its efforts to become a leading global financial center. Both reasons later proved to be justified.
In establishing the legal framework, the United Kingdom has not enacted specific laws dealing only with Islamic finance. On the contrary, Islamic banks, capital markets and insurance are subject to general UK financial laws and regulations and the same tax treatment as their conventional counterparts. However, certain amendments have been made to existing laws and regulations to facilitate Islamic finance transactions in the UK. It is important to note that the aforementioned laws and regulations use the term alternative financial arrangements, but in practice it is quite clear that this term refers to Islamic finance.
The most important changes were in the tax laws and were aimed at ensuring that the tax treatment of Sharia-compliant finances follows the treatment of conventional business models. The above made it possible to solve the basic problem, which is the system of double taxation of Islamic finance products and models.
In addition, the Finance Act 2009 provided for an exemption from State Levy Tax (SDLT) for sukuk (Islamic investment bond financing).
The supervision and regulation of all financial institutions in Great Britain, including Islamic ones, is carried out by two bodies: the FCA and the Prudential Regulation Authority (PRA). The FCA is responsible for conducting business regulations for all institutions, while the PRA is responsible for prudential regulations. Although the UK does not have a central body responsible for ensuring that transactions or products are Shariah compliant, nor does it impose a legal obligation on Islamic financial institutions to have a Shariah board, most do have Shariah boards.
Along with the establishment of a legal framework that recognizes the special characteristics of Islamic finance, things are heating up in the UK
