Scotland Act 2012 and 2016: annual implementation report 2021
Report to inform parliament of the implementation work that has been carried out on fiscal powers as required by Section 33 of the Scotland Act 2012 and paragraph 107 of the Fiscal Framework.
Fully Devolved Taxes
Costs
| £m | 2018-19 | 2019-20 | 2020-2021 (forecast) |
|---|---|---|---|
| Administration | 5.1 | 6.3 | 5.9 |
| Programme | 1.1 | 0.8 | 0 |
10. The above table reflects Revenue Scotland's costs to prepare for, administer, and implement Land and Building Transaction Tax (LBTT), Scottish Landfill Tax (SLfT), Air Departure Tax (ADT), and Aggregates Levy (AL).
Land and Buildings Transaction Tax
The Scotland Act 2012 provided for devolution and powers to introduce a tax on transactions involving interests in land. Land and Buildings Transaction Tax subsequently replaced UK Stamp Duty Land Tax in Scotland from 1 April 2015.
LBTT is a tax applied to residential and commercial lands and building transactions (including commercial leases) where a chargeable interest is acquired. LBTT is administered by Revenue Scotland, with support from Registers of Scotland (ROS).
Key developments
11. In response to COVID-19, the Scottish Government temporarily increased the nil rate band for LBTT for residential property transactions from £145,000 to £250,000, for transactions where the effective date is between 15 July 2020 and 31 March 2021 (inclusive).
12. In addition, the Coronavirus (Scotland) (No.2) Act increased by 18 months to 36 months the period in which certain buyers can sell a previous main residence and then go on to reclaim their payment of the Additional Dwelling Supplement (ADS).
Outturn for 2019-2020
13. Revenue Scotland's Annual Devolved Taxes Accounts[4], published on 25 November 2020, reported total LBTT receipts in 2019-2020 of £597 million compared to £554 million in 2018-2019.
Rates and bands
14. The previous Annual Implementation Report published in April 2020 set out the rates and bands for LBTT announced by the Scottish Government in Scottish Budget 2020-21, and the addition from 7 February 2020 of a third tax band on non-residential leases where the Net Present Value (NPV) of rental income is above £2 million.
15. In July 2020, legislation[5] introduced in response to COVID-19 temporarily increased the nil rate band for residential LBTT from £145,000 to £250,000 for residential property transactions where the effective date is between 15 July 2020 and 31 March 2021 (inclusive).
16. The legislation, intended to help support the property market in 2020-21, came into force with effect from 15 July 2020 and was approved by the Scottish Parliament on 26 August 2020, following consideration by the Finance and Constitution Committee on 19 August 2020.
17. No changes to rates and bands were announced in the Scottish Budget 2021-22. The Scottish Government has, however, confirmed that the ceiling of the nil rate band for residential property transactions will return as planned to £145,000 for transactions with an effective date from 1 April 2021.
18. Residential and non-residential LBTT rates, before and after the end of the temporary change to the increased nil rate band are outlined in Table 2 below.
| Residential transactions | Non-residential transactions | Non-residential leases | ||||
|---|---|---|---|---|---|---|
| Purchase price | LBTT rate from 15 July 2020 to 31 March 2021 | LBTT rate from 01 April 2021 | Purchase price | LBTT rate | Net present value of rent payable | LBTT rate |
| Up to £145,000 | 0% | 0% | Up to £150,000 | 0% | Up to £150,000 | 0% |
| £145,001 to £250,000 | 0% | 2% | £150,001 to £250,000 | 1% | £150,001 to £2 million | 1% |
| £250,001 to £325,000 | 5% | 5% | Over £250'000 | 5% | Over £2 million | 2% |
| £325,001 to £750,000 | 10% | 10% | ||||
| Over £750'000 | 12% | 12% | ||||
19. The LBTT Additional Dwelling Supplement remains at four per cent of the total price of the property for all relevant transactions above £40,000, and will be charged in addition to the residential conveyance rates and bands.
Legislation
20. In addition to the legislation to amend LBTT rates and bands highlighted above, provisions in the Coronavirus (Scotland) (No.2) Act also amended the arrangements for the ADS for certain transactions.
21. In recognition that some people purchase a new main residence prior to selling their previous one, provisions in the LBTT legislation provide that the ADS can be reclaimed if: (i) the buyer pays the ADS when purchasing a new main residence; and (ii) sells a qualifying previous main residence within 18 months of that transaction. The Coronavirus (Scotland) (No.2) Act extended this period to 36 months for buyers who paid the ADS in relation to a transaction within an effective date prior to 25 March 2020 and who were still within their 18 month window on that date (transactions with an effective date between 24 September 2018 and 24 March 2020).
22. This Act also provided a power for Scottish Ministers to amend, by order, the period of 36 months or the relevant period of transactions, where they are satisfied that this is appropriate for a reason related to COVID-19. These delegated powers have not been used at the time of this report being published.
23. The provisions were early expired on 29 September 2020 through expiry regulations. However, the provisions permanently amended schedule 2A of the Land and Buildings Transaction (Scotland) Act 2013. Expiry of the provisions within the Coronavirus (Scotland) (No.2) Act 2020 does not affect this, including with regard to the delegated powers provided.
Scottish Landfill Tax
Scottish Landfill Tax was introduced on 1 April 2015, replacing UK Landfill Tax. It is a tax on the disposal of waste to landfill, charged by weight on the basis of two rates: a standard rate, and a lower rate for less polluting materials.
Key developments
24. In line with the Scottish Budget 2020-21, the standard and lower rates of SLfT were increased from 1 April 2020.
25. The Scottish Government announced an intention to increase the standard and lower rates of SLfT in Scottish Budget 2021-22, with effect from 1 April 2021.
Outturn
26. Revenue Scotland's Annual Devolved Taxes Accounts, published on 25 November 2020, reported total SLfT receipts in 2019-20 of £119 million compared to £149 million in 2018-19.
Rates
27. As announced in Scottish Budget 2020-21, and confirmed through subsequent legislation[6], the rates of SLfT for 2020-21 are £94.15 per tonne for standard rated waste and £3.00 per tonne for lower rated waste.
28. The Scottish Government announced in Scottish Budget 2021-22 proposals to increase the standard rate of SLfT to £96.70 per tonne and the lower rate of SLfT to £3.10 per tonne, with effect from 1 April 2021. Legislation was made and laid in the Scottish Parliament on 19 February to provide for this inflation-based increase, which will ensure consistency with planned Landfill Tax charges in the rest of the UK.[7]
29. No changes have been made to the Scottish Landfill Communities Fund credit rate, which remains at 5.6%.
Legislation
30. Other than the increase to rates outlined above, no new legislative changes have been made to the arrangement for SLfT.
Air Departure Tax
Air Departure Tax is Scotland's planned replacement for Air Passenger Duty, which was devolved by the Scotland Act 2016. The UK and Scottish Governments have agreed that the introduction of Air Departure Tax will be deferred in order to allow for the issues raised with regard to the Highlands and Islands exemption to be resolved.
Key developments
31. The introduction of ADT in Scotland has been deferred to allow the issues raised in relation to the exemption for flights departing from the Highlands and Islands to be resolved.
32. The UK Government will maintain application of Air Passenger Duty in Scotland in the interim. The Scottish Government will engage with HM Treasury (HMT) on their planned consultation on Air Passenger Duty reform to find a solution that remains consistent with the Scottish Government's climate ambitions.
Aggregates Levy
The Scotland Act 2016 provided the Scottish Parliament with the power to legislate for a tax to replace the Aggregates Levy in Scotland. Aggregates Levy is a tax paid on the commercial exploitation of primary aggregates i.e. crushed rock, sand, and gravel.
Key developments
33. In August 2020, the Scottish Government published a report commissioned from the environmental consultancy Eunomia[8]. The report investigated the historical complexities and impact of the Aggregates Levy in the UK and set out illustrative future tax policy options for a Scottish Aggregates Levy, which modelled scenarios and potential impacts.
34. Since publication of the fourth annual implementation report, the Scottish Government has also engaged with the UK Government on its review of the UK Aggregates Levy[9], which was published in July 2020.
35. Following on from this, work will be undertaken to consider policy options and develop the necessary evidence base to support the introduction of a devolved levy in Scotland. It will be for the next Scottish Parliament to consider the legislation that would be required to provide for this.
Contact
Email: alex.brown@gov.scot
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