Sixth Annual Report on the Implementation of the Scotland Act 2016: Tenth Annual Report on the Implementation and Operation of Part 3 (Financial Provisions) of the Scotland Act 2012

2. Fully Devolved Taxes

The Scotland Act 2012 provided for the devolution of powers to introduce a tax on transactions involving interests in land and on disposals to landfill. This led, respectively, to the introduction of Land and Buildings Transaction Tax (LBTT) and Scottish Landfill Tax in Scotland from 1 April 2015.

The Scotland Act 2016 subsequently provided for the devolution of powers to introduce a tax charged on the carriage of passengers by air from airports in Scotland and on the commercial exploitation of aggregates in Scotland. Devolved taxes drawing on these powers have not yet been introduced.

Costs

13. 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

LBTT replaced UK Stamp Duty Land Tax (SDLT) in Scotland from 1 April 2015. LBTT is a tax applied to residential and commercial land and building transactions (including commercial leases) where a chargeable interest is acquired. LBTT is collected and administered by Revenue Scotland, with support from Registers of Scotland (ROS).

Outturn for 2020-2021

14. Revenue Scotland's Annual Devolved Taxes Accounts^[2], published on 3 December 2021, reported total LBTT receipts in 2020-2021 of £517 million compared to £597 million in 2019-20. This revenue reduction was related to the effect of the COVID-19 pandemic on property markets and the temporary increase in the residential LBTT zero rate threshold from £145,000 to £250,000 throughout most of 2020-21.

Rates and bands

15. On 31 March 2021, the temporary increase in the nil rate band for residential LBTT came to an end. No changes were made to the rates and bands of LBTT during 2021-22.

16. Rates and bands in 2021-22 were as follows and will remain in place in 2022-23:

17. The LBTT Additional Dwelling Supplement (ADS) remains at four per cent of the total price of the property for all relevant transactions of £40,000 and above, and will be charged in addition to any other amount of LBTT due.

*LBTT on lease premia is payable at the same rate and in the same bands as non-residential conveyances.

Legislation

18. No legislative changes were introduced for LBTT in 2021-22.

19. Following an announcement in the Scottish Budget 2022-23, a call for views and evidence on the ADS was launched on 16 December 2021. This closed on 11 March 2022.

Scottish Landfill Tax

Scottish Landfill Tax (SLfT) 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. SLfT is collected and administered by Revenue Scotland, with support from Scottish Environmental Protection Agency (SEPA).

Rates

20. As announced in the Scottish Budget 2021-22, and confirmed through subsequent legislation^[3], the rates of SLfT for 2021-22 were £96.70 per tonne for standard rated waste and £3.10 per tonne for lower rated waste.

21. The Scottish Government announced in the Scottish Budget 2022-23 proposals to increase the standard rate of SLfT to £98.60 per tonne and the lower rate of SLfT to £3.15 per tonne, with effect from 1 April 2022. Legislation^[4] was made and laid in the Scottish Parliament on 9 February to provide for this inflation-based increase, which will ensure consistency with planned Landfill Tax charges in the rest of the UK.

22. No changes have been made to the Scottish Landfill Communities Fund (SLCF) credit rate in 2021-22. This remains at 5.6%.

Outturn

23. Revenue Scotland's Annual Devolved Taxes Accounts^[5], published on 3 December 2021, reported total SLfT receipts in 2020-21 of £107 million compared to £119 million in 2019-20. The pandemic disrupted waste markets and therefore SLfT revenue flows in 2020-21.

Legislation

24. Other than the increase to rates outlined above, no new legislative changes have been made to the arrangement for SLfT in 2021-22. On 25 November 2021, a consultation was launched on potential changes to the SLfT Prescribed Activities Order^[6].

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.

25. The introduction of ADT in Scotland remains deferred to allow the issues raised in relation to the exemption for flights departing from the Highlands and Islands to be resolved.

26. The UK Government will maintain application of Air Passenger Duty in Scotland in the interim. The Scottish Government continues to engage with the UK Government 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.

27. The Scottish Government continues to progress work on a devolved levy and confirmed in the Scottish Budget 2022-23 that the necessary primary legislation would be introduced in this session of the Scottish Parliament.

28. In December 2021, the British Geological Society were commissioned to undertake a survey of aggregate minerals in Scotland which will provide up-to-date information on the quantities, reserves, sales and movement of aggregate minerals in Scotland.