The Scottish Parliament’s Finance Committee recently held a call to evidence seeking views on the first full year of operation of the Scottish Land and Buildings Transaction Tax. 

Areas of Interest

The Government was seeking views on a number of particular issues, including:

• The impact on both the residential and commercial property market of the various rates and bands.
• The extent to which the rates and bands are consistent with the principles of “fairness, equity and the ability to pay”.
• The level of receipts for residential and non-residential transactions in relation to the forecasts.
• The impact of forestalling and whether it is likely to have a short-term impact only or lead to longer-term changes in the market.
• Whether there should be any changes to the rates and bands in the draft budget for 2017-18.
• The performance of Revenue Scotland in administering and collecting the tax.

Thoughts of the SPF

One organisation to respond to the call for evidence was the Scottish Property Federation (SPF), which believes the main impact on the property markets has been at the high value end of the residential market (above £325,000) where both the value and number of transactions fell after several years of growth.

It recommended that the 5% threshold of residential LBTT be raised to £500,000 in the light of evidence suggesting a downturn in the value and number of transactions at this level of the market in the first year of LBTT. 

“While the tax seems to have bedded in well for much of the lower value markets we feel there are improvements to the rates and thresholds for the residential 5% band in particular, which is very narrow under the current regulations,” explained David Melhuish, director of the SPF.

“In the residential market, we need to ensure buoyant activity across all tenures,” he added. “People need to upsize and downsize as well as relocate for work or other reasons. If you make it harder for people to move at the higher end of the market, then it makes it more difficult for people aspiring to move into that market. This then makes is more difficult for people to get a foot in the housing market at all if the number of properties available is reduced.”

Homes for Scotland’s Response

Trade body Homes for Scotland also responded to the call for evidence, and highlighted similar concerns over the impact of the LBTT on the higher end of the market.

“Given that people purchasing at the higher end of the market tend to be discretionary movers,  meaning they are choosing to move rather than having to because of circumstance, our concern is that, by staying put, they block others from progressing onto or up the property ladder and thus exacerbate the country’s housing crisis,” said Director of Policy, Karen Campbell.

“That is why we are suggesting that the current five per cent band be extended up to the price ceiling of £925,000, mirroring the position south of the border to help ensure Scotland remains an attractive place in which to invest,” she added.

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