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Alistair Darling has closed a loophole in Sharia finance rules that allowed commercial property investors and international banks to avoid paying stamp duty on more than £1 billion of property deals in Britain. The Government brought in changes to stamp duty three years ago amid concern that people opting for Sharia-compliant mortgages were paying stamp duty twice. Commercial property developers discovered a quirk in the legislation that allowed them to escape stamp duty altogether. More than a dozen office buildings in London have been sold in the last year using complex Sharia deals, according to industry sources.

Kevin Griffin, head of stamp taxes at Ernst & Young, said: “The Government has closed an obvious piece of tax avoidance . . ..”

Tightening the law on Sharia finance should create a level playing field with Sharia-compliant property acquisitions and conventional buyers paying stamp duty just once at a rate of up to 4 per cent of the price for assets worth £500,000 or more.

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