As it will be based on Scottish conveyancing practice and will introduce a progressive rate of payment rather than the current slab structure it will be regarded as leading the way, according to the Law Society of Scotland.
The new Land and Buildings Transaction Tax will replace the current UK wide Stamp Duty Land Tax from April 2015. At present, stamp duty is applied at 1% for properties costing between £125,000 and £250,000 and 3% on those sold for £250,000 to £500,000.
As part of the Scotland Act 2012, the Scottish government will take responsibility for taxes on land transactions from April 2015 when the UK Stamp Duty Land Tax is replaced with the Land and Buildings Transaction Tax.
‘We very much welcome the introduction of a progressive tax structure, rather than the current structure which is perceived by many to be unfair due to the steep rise in tax for properties just above the thresholds,’ said Isobel d’Inverno, convener of the Society’s Tax Law committee.
‘This distorts the market by keeping prices artificially low and gives rise to avoidance under stamp duty land tax. We believe that this new progressive structure will eliminate these issues,’ she explained.
‘This proposed new tax has the potential to make a real improvement to the current system in Scotland. It is very much drafted in Scots law terminology, and reflects Scots property law and conveyancing practice,’ she pointed out.
‘The introduction of a much simpler regime for a land and buildings transaction tax will be of great assistance to solicitors and their clients and will make it much more workable and easier to administer,’ she added.
It is also welcomed by the Edinburgh Solicitors Property Centre (ESPC) which represents solicitor estate agents in Edinburgh, but it has some concerns, most notably that it could place a ‘significant financial burden on families’ in Scotland’s capital city and other areas with higher than average house prices.
The Bill must have an awareness of regional variations in the property market as currently a difference in property selling price of just £1 can lead to thousands of pounds in additional tax for the buyer, the ESPC said.
The ESPC suggested that the rate of tax increases in relation to selling price must be well balanced in order to allow people to move up and down the property ladder.
‘I don’t think it would be practical to have regional stamp duty. I think that certainly would lead to complexity and would need constant revision. I do think however there needs to be awareness of regional markets and the make-up of those when setting stamp duty rates,’ said David Marshall, business analyst at ESPC.
‘The move away from the current system is something that we are very much in favour of, it is just that rate of increase that we need to be careful of to make sure that the differential in tax, for example for someone buying a property at £250,000 isn’t massively less than someone buying a property at £350,000. If you do see that large disparity then that could create inequalities in the market,’ he explained.
He added that whilst one of the aims of a progressive system of taxation is to place a greater burden upon those who have the broadest shoulders, it is worth pointing out that households buying a home worth £400,000 aren’t necessarily rich.