Scottish Government outlines planned 'progressive' tax replacement to stamp duty land tax

The proposed new 'land and buildings transaction tax' would come into effect from April 2015 under new tax powers handed to the Scottish Parliament under the Scotland Act 2012. The Scottish Government has also announced that proposals for a new 'landfill tax' will also be consulted on in the autumn as part of its plans to utilise the new tax powers at its disposal.

The proposed land and buildings transaction tax would apply to both residential and non-residential transactions and would set yet-to-be-defined thresholds above which varying charges would generally be levied on purchasers of land and property. In a consultation document outlining the plans the Scottish Government said that it is minded to have the precise tax levied on purchasers calculated by applying the particular charges relevant to the amount of money paid above each threshold figure on a staggered basis.

At the moment stamp duty land tax is levied using a "slab tax approach", the Scottish Government said, where the tax payable on transactions is calculated on the basis that the charge due above a certain threshold is levied on the whole purchase price of the land or property.

Scottish Finance Secretary John Swinney said the planned changes would save 95% of those in the property market money.

"Our consultation signals our preference for a move from the UK’s slab tax approach to a progressive system of taxation where the amount paid is more closely related to the value of the property and therefore to the ability of the individual to pay," Swinney said in a statement. "At the same time our consultation also indicates a willingness to adjust the threshold at which taxation is levied in order to support those at the lowest end of the market."

"We will take the views of the public and tax professionals through our consultation – however to demonstrate the difference taking a progressive approach can bring for those purchasing property in Scotland, the consultation paper illustrates two revenue neutral scenarios, one that would remove the tax charge from all house purchases below £180,000 - significantly benefitting first time buyers - and one that ensures all those purchasing properties under £325,000 would see the tax they pay decrease, bringing benefits to around 95% of the property market. Those purchasing property at higher values would of course pay more," he said.

Property law expert Alan Cook of Pinsent Masons, the law firm behind Out-Law.com, said that the Scottish Government's proposals were to be "welcomed".

"The Scottish Government has expressed a preference for a more progressive set of tax levels than the current system, tailored for Scottish circumstances," Cook said. "In addition they propose to use the tax to further their wider policy aims such as encouraging increased availability of social housing and assisting first time buyers and those in the lower price brackets."

"The property industry will of course be concerned by any knock-on increase in rates for commercial/higher value properties, and will I know continue to engage with the Scottish Government to assist it in formulating its approach to the new tax in a way which works for all," he said.

The Scottish Government has also outlined plans to create a new tax body that it said will enable it to collect taxes payable under the new land and buildings transaction tax and landfill tax proposals at a lower cost than HMRC had proposed to charge. Swinney said Revenue Scotland, in collaborating with Registers of Scotland and the Scottish Environmental Protection Agency, would provide a 25% saving on the cost for HMRC to do the same job.

Under the Scotland Act 2012 the Scottish Parliament has the power to determine the taxes on the purchase or leasing of land and buildings and the disposal of waste to landfill from April 2015.