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More work to be done as Scottish Parliament approves stamp duty land tax replacement, says expert

Out-Law News | 26 Jun 2013 | 5:24 pm | 2 min. read

A "huge amount of work" remains to be done to provide Scottish businesses with the certainty they need on how the Scottish Government's proposed replacement to stamp duty land tax (SDLT) will work, an expert has said.

Alan Cook of Pinsent Masons was commenting as the bill that will establish the Land and Buildings Transaction Tax (LBTT) from April 2015 was passed by the Scottish Parliament.

"Now that the Bill is in its final form we start to move towards some level of certainty, but there is still a huge amount of work to be done before we get there – including changes to the rules on partnerships and trusts, the introduction of detailed reliefs to allow subsales as part of forward funding, and of course the level of the rates themselves," he said.

"Concerns remain about the level the rates will be set at and at the Scottish Government's apparent intention not to reveal the rates until late 2014. In addition, the lack of a general subsale relief will be a real concern for housebuilders and other developers. It is to be hoped that the Scottish Government will continue apace to 'fill in the blanks', as above all what businesses need is certainty," he said.

Subsale relief prevents a double SDLT charge when someone contracts to buy property and then sells the property on before they have acquired it from the original seller, so that the property is transferred directly from the original seller. Subsales are commonly used in property investment and development transactions.

The LBTT (Scotland) Bill uses powers set out in the Scotland Act 2012 to enable the Scottish Parliament to both set and collect a proportion of its own revenue. Once in force, it will apply when land or buildings are purchased or leased.

The Scottish Government has proposed a progressive tax structure, similar to the current income tax system, where slices of the transaction price will be taxed at increasing percentages. SDLT currently operates a 'slab' system of taxation, where the amount of the underlying transaction determines a single rate of tax which is applied to the whole amount.

The Bill will also create a new body, Revenue Scotland, which will be responsible for collecting and administering the tax in conjunction with Registers of Scotland.

"The Scottish Government has set out our innovative approach to taxation that is much better aligned with the Scottish market, with Scots law and practices, and the principle of progressive taxation. This legislation allows the Scottish Government to set and collect taxes in a more efficient way and at less cost than the UK Government," said Finance Minister John Swinney.

"We will set the tax rates nearer the time. However the system we have proposed would allow us to support first time buyers trying to get onto the housing ladder or families buying bigger homes that better suit their needs. Rather than the current distortive 'slab' approach, Scottish taxpayers will pay an amount more proportionate to the value of their property," he said.