Taking Forward a Scottish Land and Buildings Transaction Tax Consultation: An Analysis of Responses

1. INTRODUCTION

About this report

1.1 This report provides an analysis of responses to the Scottish Government's Consultation on "Taking Forward a Scottish Land and Buildings Transaction Tax". The report provides a detailed analysis of responses to each of the consultation questions; identifies where particular views can be ascribed to specific groups of respondents; and summarises more general comments expressed.

Background to the consultation

1.2 The Scottish Parliament will have new financial powers from April 2015 over taxes on land and property transactions and on disposal to landfill. This consultation is the first of three dealing with these devolved tax powers and is focused on introducing a land and property tax to replace the current UK Stamp Duty Land Tax (SDLT) system. The consultation forms part of a wider programme including two further consultations on landfill tax and tax management. There will also be a consultation on tax management arrangements, covering issues like tax collection, the use of information, penalties for late payment or for tax evasions and appeals.

1.3 The consultation on a replacement Stamp Duty Land Tax for Scotland sought views from those with an interest in land and property sales and leases, including people who may buy or sell a home in the future, businesses who may buy or lease commercial property, farmers who buy or lease land, conveyancing solicitors, estate agents, surveyors, lenders, and third sector and equalities groups.

1.4 The immediate aim of the consultation was to gather views on how best to design the replacement tax on land and property transactions in a way which minimises distortions, make it as easy as possible for tax to be paid and maximises receipts. Whilst the majority of the existing elements of the UK SDLT system will be retained, the following key changes were proposed:

Changes to the way SDLT charges are calculated

• The consultation considers the introduction of a progressive tax rate structure so that the tax, like income tax, is only paid at the applicable rate(s) on the amount within each threshold. This would mean that SDLT charges would rise more proportionately in line with the purchase price or rent/lease premium paid. A progressive rate should also help to reduce market distortions and address issues of tax evasion. To reflect the fact that some businesses purchasing high-value land or property could pay more as a result of a progressive rate, the Scottish Government proposes to include a lower top rate for non-residential property than for residential property. This would prevent a progressive rate from having a significant negative impact on Scottish businesses compared to those based elsewhere in the UK.

Changes to the administration of SDLT and how it links to land registration

• This proposal is aimed at encouraging taxpayers to submit both SDLT returns and payments online at the same time by requiring that land or property can only be registered once any tax due has been paid. Currently, title to land or a lease can be registered after a return has been submitted, but the taxpayer has 30 days in which to pay the tax. This aims to streamline the administrative process, both for solicitors who are handling their clients' returns and for the collection agent.

1.5 A number of other changes were also proposed, for example to the scope of reliefs and lease charges for residential property.

1.6 The consultation included 17 questions:

• Questions 1-8 covered the proposed structure and scope of the tax including the move from a "slab" system to a progressive tax; future amendments to support key Scottish Government policies; exemptions and reliefs; and the treatment of both residential and commercial leases.
• Questions 9-10 related to anti-avoidance measures.
• Question 11-13 asked about proposals for online returns and linking payment of tax with registration of title.
• Question 14 sought views on the treatment of Partnerships and Trusts.
• Questions 15 and 16 covered business and regulatory and equalities draft impact assessments.
• Question 17 sought any other views. Many respondents made comments directly in response to this question or in covering letters, and these have been taken into account in the report.

1.7 The responses were sorted and an initial analysis undertaken using a response matrix (based on an Excel spreadsheet). Respondents were categorised into stakeholder groups and the responses were fed into the matrix in accordance with the answer to the consultation question. An initial quantitative analysis was conducted for each question. However, the detailed analysis was mainly qualitative and drew out the themes and issues emerging within each question as well as the range of views expressed. It also explored any specific patterns between and within stakeholder groups (as defined in Table 2.1).