The Islamic bond could be issued in the coming weeks, subject to market conditions, The Treasury said in a statement late on Thursday.
A sovereign sukuk is the centrepiece of Prime Minister David Cameron's bid to position London as a leading hub for Islamic finance, as competition heats up with financial centres in the Middle East and Asia.
The bond would be issued before similar transactions planned by Luxembourg, Hong Kong and South Africa, all keen to diversify their funding sources and tap liquidity provided by increasingly wealthy Islamic investors.
In January, Britain appointed HSBC to arrange the deal and it has now added four more banks to the syndicate: Qatar's Barwa Bank, Malaysia's CIMB, National Bank of Abu Dhabi and Standard Chartered [STANB.UL].
The sukuk will use an ijara structure, a sharia-compliant sale and lease-back contract, allowing the rental income of three central government offices to underpin the transaction.
In an ijara sukuk, a party leases equipment, buildings or other facilities to a client for an agreed rental price - a popular format among both sovereign and corporate issuers.
Britain has six full-fledged Islamic banks and over 20 institutions in the country that offer sharia-compliant financial services, which follow religious principles such as a ban on interest and gambling.
A sovereign sukuk could help Britain's Islamic banks to help manage their short-term liquidity needs.
In March, The Bank of England said it was studying ways to increase the number of sharia-compliant assets that Islamic banks can use in their liquidity buffers, a step towards reducing concentration risks in the sector.
Britain considered a sovereign sukuk six years ago, but that issuance never materialised as the Debt Management Office decided the structure was too expensive at the time.