House of Lords Economic Affairs Committee Finance Bill submission - CIOT comments
The supplement was announced in the Scottish draft budget for 2016-17, published in December 2015. This corresponds to the similar proposal for Stamp Duty Land Tax brought forward by the UK Government in the Autumn Statement 2015.
The CIOT notes the short timeframe, and lack of a full consultation, as potentially causing difficulties in producing good legislation, while acknowledging that the Scottish Government felt it necessary to react to the UK Government‚ s equivalent proposal for Stamp Duty Land Tax.
Given the Scottish Government‚ s stated commitment to a tax system that has regard to Adam Smith‚ s four principles, we raise concerns that the proposal will not fulfil this commitment. For example, we believe it will lead to uncertainty and the tax will not be convenient to pay.
One means of mitigating the uncertainty that will arise for many ordinary house buyers, simply moving house, (by selling their only home and buying a new sole residence), would be a targeted relief. Otherwise, most purchasers will have at the very least to address the risk of having to pay the supplement, for example if their buyer pulls out.
Our submission points out that it is likely to prove difficult for Revenue Scotland to police compliance in respect of properties owned outside Scotland, and more particularly outside the UK; this is especially the case where the purchasers are non-resident and non-domiciled.
The response also draws attention to a number of areas of potential complexity, unfairness or confusion, such as the different definition of a main residence for LBTT from capital gains tax, the treatment of married couples and civil partners, and the rules for joint purchases and part sales.
It is likely that the legislation will be passed by the Scottish Parliament by the end of March, with the intention of the measure taking effect from 1 April 2016. Revenue Scotland will publish guidance, on which they will engage with stakeholders, such as the CIOT.
The full CIOT response is available here.