A leading tax adviser is calling on businesses and individuals who own or plan to buy property in the next few years to participate in the Scottish Government’s consultation on a new Land and Buildings Transaction Tax.
As it stands, there may be both winners and losers from the Scottish Government’s proposals, and Grant Thornton’s Director of Tax, Vishal Chopra, says that it is vital that there is proper engagement now, before it is too late.
The consultation, which focuses on alternatives to the current Stamp Duty Land Tax (SDLT) arrangements in Scotland, ends on 30th August and has been heralded as a “first and significant step on a journey towards much greater financial self-determination for Scotland” by John Swinney, Cabinet Secretary for Finance and Sustainable Growth.
The LBTT largely mirrors the current SDLT regime but suggests a move away from the current 'slab' system to a more progressive structure similar to that for income tax. In many cases this is expected to result in less tax being payable than at present, particularly at the lower end of the market, with more tax arising for higher value properties. The consultation also proposes potential ‘incentives’ for energy efficiency, as well as asking for comment on the introduction of regional tax rates which could also vary for different land uses.
Critically, according to Vishal, no comment is made on thresholds or proposed rates of tax, with all such decisions being deferred until the Scottish Government's 2015/16 budget is set. Although it will be some time before there is certainty around how the proposals will impact individual taxpayers, Vishal says that those operating in the property sector have an opportunity to influence the structure of the new tax now.
“The implications of proposals for the Land and Building Transaction Tax are far reaching and have the potential to affect everyone from the first time buyer through to corporates with interests in property. On the one hand it offers an easier, fairer system, with less incentive for manipulation, but there are likely to be those who may lose out under the new proposals.
“For instance, the Scottish Government gives illustrative examples of how the new tax might apply to show how overall revenue neutrality could be achieved, but it will be a few years yet before the exact thresholds and rates of tax are known.
“Similarly, the consultation highlights how a progressive tax structure may give more stability to first-time buyers who have seen the UK Government's incentives recently come to an end. However, residential property at the higher end of the market will attract more LBTT when compared to the current system. Is this acceptable and where will the lines be drawn?
“The Scottish Government is also consulting on the interaction of its new LBTT with other key priorities such as lower rates for zero carbon homes which will be of interest to businesses involved in energy efficiency property aspects. It also considers if different rates are appropriate for different parts of Scotland or for different land uses so businesses across different regions and in different sectors will be affected too.
“I would encourage everyone affected to get involved. Grant Thornton will be making representations to the Scottish Government on behalf of our clients, and would be happy to assist others in responding too.”
To respond to the Government’s consultation go to: http://www.scotland.gov.uk/Publications/2012/06/1301
Notes to Editor
The consultation offers the following illustrations:
- On the purchase of non-residential properties of up to £150,000 no LBTT would be payable, in line with the current SDLT system; a higher rate of 4.4% could apply for transactions above £250,000.
- A the purchase of residential properties under £180,000 would incur no tax at all under the new regime; based on the period from 2007 to 2009 this would have covered 70% of all house purchases in Scotland. Under the same proposals, the purchase of properties above £300,000 would, however, give rise to more LBTT when compared to the current SDLT system.
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