LBTT reforms in ‘weeks rather than months’

Arthur made the comments in an evidence session with the Scottish Parliament’s Finance and Public Administration Committee as part of their scrutiny of a separate proposal to increase the ADS tax rate.

You can read the transcript of the meeting here.

LBTT is the devolved replacement for UK Stamp Duty Land Tax (SDLT) in Scotland. It replaced SDLT from 1 April 2015. Wales also has its own devolved replacement for SDLT, known as Land Transaction Tax.

The ADS is an additional rate of tax – paid in additional to standard LBTT rates – that is charged on additional properties like a second home, rental property or holiday property (more info here).

Ministers say the change will help to support first-time buyers and home movers by helping them to compete with buy-to-let and second home owners.

Concerns over the operation of the levy – first introduced in 2016 – led the SNP to promise in its 2021 election manifesto to undertake a review of the ADS. A consultation was published in 2022, which the CIOT responded to.

A summary of some of the issues encountered with the levy can be found in this Law Society of Scotland briefing.

Liz Smith (Conservative) asked why Ministers had decided to press ahead with a rate increase while the outcome of the policy review remained outstanding, describing it as a ‘a case of putting the cart before the horse’.

Arthur acknowledged that this was a ‘perfectly fair and reasonable point’, stating it had been the government’s intention to ‘have progressed (the ADS review) further’, but that its ‘complexity’ and ‘the importance of being able to provide certainty’ had meant the review had taken longer than expected.

He told the committee he expected the review’s findings to be produced ‘in the realm of weeks rather than months’, alongside regulations for consultation.

The focus of the committee’s scrutiny centered around the rate increase from 4 to 6 per cent. MSPs from across the parties represented on the committee expressed concern about the impact of the increase on the availability of housing stock and the importance of being able to model and map changes in taxpayer behaviour resulting from the change.

Tom Arthur defended the government’s approach while acknowledging these concerns. He said the government’s approach to LBTT was balanced, with the ‘strongly performing tax’ providing additional revenues for the Scottish Budget while supporting wider policy aims.

Following the debate, MSPs passed the Land and Buildings Transaction Tax (additional amount: transactions relating to second homes etc.) (Scotland) Amendment Order 2022 by 5 votes to zero, with the two Conservative MSPs abstaining.