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The Inland Revenue is considering recognising polygamy for some religious groups for tax purposes. Officials have agreed to examine “family friendly” representations from Muslims who take up to four wives under sharia, the laws derived from the Koran.
Existing rules allow only one wife for inheritance tax purposes. The Revenue has been asked to relax this so that a husband’s estate can be divided tax-free between several wives.
The move is bound to create controversy if it leads to a change in the rules. It is seen as a breakthrough by Muslim leaders who have been campaigning to incorporate sharia into British domestic law.
Ahmad Thomson, of the Association of Muslim Lawyers, said: “Wives and immediate children should be exempt from inheritance tax. If the government is family friendly they should change a tax which is unfairly hitting minority religious values.”
Any concession by the Revenue could open a wider debate about the legality of plural marriages. At present a person married to more than one people can be charged with bigamy.
Muslim marriages to second, third and fourth wives are not valid in civil law, with the women effectively regarded as mistresses with no legal or tax rights.
However, some official bodies have already pointed out that tax laws are unfavourable to religious groups that recognise more than one spouse.
The National Audit Office (NAO) recently concluded that the tax system inadvertently penalised devout Muslims. An NAO inquiry into inheritance laws found that devout Muslims were not able to take full advantage of British tax law, which allows spouses to inherit an entire estate from their husband or wife tax free.
By contrast, for the many Muslim families who observe sharia, the woman receives only an eighth share of her husband’s estate tax free. The rest of the estate above the British inheritance tax threshold of £265,000, is taxed by the Inland Revenue at 40%.
Sadiq Khan, a leading Muslim politician, said: “I am pleased to see the Inland Revenue applying common sense to the application of Islamic law on uncontroversial matters such as inheritance.
“There are some other uncontroversial areas of Islam law which could easily be applied to the legal system we have in the UK.”
He insisted there was no question of pressing for the introduction of sharia’s criminal code “where people are flogged or have their hands chopped off”. He said: “This is not the thin edge of the wedge.”
The NAO also points out that Jews who follow the traditional code of halakah are similarly penalised because it requires estates to be passed through the male line.
The change in position by the Revenue emerged in correspondence from its capital taxes technical group sent to Haroon Rashid, an expert in inheritance tax planning at the law firm, BK Soliciors.
John W Murray, an official, wrote on November 29 in reply to a question on how to calculate tax on a will under Islamic law: “It is a question of Islamic law whether or not this is the case. If there is any authority that you could direct us to then we would gladly consider it.”
A Treasury spokesman said: “We keep all areas of the tax system under review, and we are willing to consider all representations put to us on how to ensure the tax system operates in a fair, simple and consistent way.”
Gordon Brown, the chancellor, has already made one significant concession to adapt to the dictates of sharia. In the 2003 Finance Act he spared Muslims from paying stamp duty twice on their properties when they took out “Islamic mortgages” that complied with the sharia ban on paying interest.
The Islamic mortgages involve the lender buying the house — ownership is transferred to the purchaser only at the end of the repayment period.
(Posted on December 29, 2004)