Property Taxes


The Finance Committee of the Scottish Parliament issued a call for evidence at the end of June 2016 to assist their inquiry into the operation of Land and Buildings Transaction Tax (LBTT) in its first full year (1 April 2015 to 31 March 2016). The inquiry also considered forecast tax revenues in comparison to actual outturn figures.

We have responded to the consultation on the Reform of the Substantial Shareholding Exemption (SSE).  

In our response to the second consultation on Tax deductibility of corporate interest expense, we have said that mooted start date of April 2017 is too ambitious given the scale and complexity of the new regime. We suggested that said there is no need to rush in changes in this area because there are already a variety of rules which limit the tax deductibility of corporate interest expense, such as the Worldwide Debt Cap (WWDC) restrictions and the GAAR.

These clauses introduce new reliefs from the Annual Tax on Enveloped Dwellings (ATED). Clauses 123 and 124 introduce essentially the same reliefs for ATED that clauses 119 and 120 do for the SDLT higher rate. Clause 125 makes clear that ATED continues to apply to alternative property finance arrangements (Shari’ law compliant) in respect of properties in Scotland, even after devolution of SDLT (Scotland now has its own Land and Buildings Transactions Tax (LBTT). 

Clause 79 corrects a technical error removing a potential double charge that may result from the interaction of the non-residents CGT (NRCGT) rules with the rules on CGT related to the annual tax on enveloped dwellings (ATED) and other aspects of the CGT code.

The Finance Act 2015 changes limited the availability of relief on a disposal of personal assets used in a business (‘associated disposals’) when the business was sold to members of the claimant’s family under normal succession arrangements.

In the CIOT’s recent submission to the Treasury Committee’s Inquiry into the 2016 Budget, we said the following: 

Clause 69 introduces the new replacement relief for landlords for capital expenditure incurred in replacing furnishings, appliances etc. It replaces the old wear and tear allowance that was available for furnished lets only (repealed by clause 70). The old wear and tear allowance allowed landlords to deduct (broadly) 10% of their rental income regardless of expenditure actually incurred.

The amendments made by clause 26 to the provisions dealing with the restriction of relief for finance costs relating to residential property businesses (originally enacted in Finance (No 2) Act 2015) do not address the anomaly raised at the time by the CIOT, ie. its application to Interest In Possession Trusts1 (IIP trusts) and personal representatives (PRs) that carry on a property business in circumstances where there is low or nil net rental income after finance costs. The tax treatment undermines the basis of taxation of an IIP trust and, perhaps to a lesser extent, of PRs.