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LBTT Review for Scotland

Thursday 15 December 2016

In April 2015, the Land and Buildings Transaction Tax (LBTT) came into effect in Scotland, replacing UK Stamp Duty Land Tax. The Scottish Parliament's Finance and Constitution Committee has reported on the first year’s operation of the LBTT and delivered some of its key findings.

NAEA responded to the Committee’s reports in October 2015, January 2016 and August 2016 offering our views on the implementation and operation of the tax.

A key challenge the committee raised was the lack of consistency in the presentation of data, citing this as a main factor in the difficulty of forecasting and monitoring data. The monthly NAEA Housing Market Survey figures offer a picture of the UK and whilst they are not regionalised, they do provide a clear representation of the market.

Though the committee makes reference to being unable to draw any definitive conclusions on the impact of the first year’s operation, property sales in the high end of the market have slowed since the introduction of LBTT. In the August 2016 NAEA consultation response, it was clear that sales of properties priced between £500,000 to £1,000,000 remained scarce.

The Committee recommended that the Government assess the long term behavioural responses to the new tax at the higher end of the market in order to evaluate whether there was a need to review the rates and bands for residential LBTT. NAEA welcomed these recommendations, however Finance Secretary Derek McKay has since announced in his budget that the rates of LBTT will not be changed.

The Scottish Government have stated that their rates have “lifted 15,000 people out of tax and in to homeownership”

Whilst a focus on tax relief at the lower end of the market is apparent (with a rate of 0% up to £145,000 compared to the UK’s rate break up to £125,000), the Committee has invited the Scottish Government to provide information in relation to the impact that LBTT has had on the first-time buyer market. According to Registers of Scotland, house prices have increased by 3.4 per cent in the last year and NAEA supports the consideration into whether the provision has contributed to this.

In response to the Committee's report, the Cabinet Secretary reiterated the Scottish Government's efforts, stating LBTT was intended to “support the majority of first time buyers, improving the affordability of new starter homes."

He continued: “Tax relief at the lower end of the market will stimulate the economy—stimulate purchases and support first-time buyers—and we are doing that”

NAEA will continue to engage with the Scottish Government and the Finance and Constitution Committee to ensure member's voices are heard.

We would greatly encourage members to contribute their views to future consultations and take part in NAEA monthly surveys as the information really can help to shape the Government’s views of the market and influence future decision making.