STAMP Duty is to be scrapped in Scotland in the most radical overhaul of the taxation system since devolution, the Scottish Government has announced.
Finance secretary John Swinney yesterday said the property duty would be replaced by a more progressive tax which he said would be “fairer” – but would hit those buying homes for more than £325,000.
Mr Swinney also unveiled plans for a new tax-collecting body that would administer the new Land and Building Transaction Tax. Revenue Scotland, will also act instead of Her Majesty’s Revenue and Customs (HMRC) to collect a new environmental tax to replace Landfill Tax.
The changes will be introduced after both Stamp Duty and Landfill Tax come under Holyrood control in April 2015, following a substantial transfer of powers from Westminster under the Scotland Act.
Mr Swinney said his new Land and Building Transaction Tax would be more closely related to an individual’s ability to pay than Stamp Duty, because it would be more closely linked to a property’s value.
Under his “progressive” plans, people looking to buy houses priced more than about £325,000 will pay more tax than they currently would under the Stamp Duty system.
Those buying property under that level would pay less duty than under the current system, while those looking to buy a home worth £180,000 or less would be exempt from paying the new tax altogether – a move to encourage first-time buyers.
Mr Swinney also claimed his plans to establish Revenue Scotland to administer and collect the new taxes will prove cheaper than leaving them under the control of HMRC.
Making his announcement in the Scottish Parliament, Mr Swinney said the HMRC had told him it would cost more than £22 million for the UK body to look after the new taxes until 2020.
That compared with the £16m he said it would cost for Revenue Scotland to fulfil the same task.
He added that the creation of Revenue Scotland paved the way for independence.
“With full fiscal responsibilities, we could tailor policies to match the aspirations of the Scottish people and deliver competitive advantages… These are the opportunities opened up by independence.”
Political opponents claimed his proposals could encourage tax evasion and questioned whether setting up a quango would save public money. Labour finance spokesman Ken Macintosh said: “Scottish councils already collect local taxes, so it is not as if we aren’t smart enough to do this, but John Swinney – the man who promised a bonfire of the quangos – is now creating a brand new one.
“There is a real risk that, under the SNP’s plans, hard-working families will end up paying significantly more. Most people feel it is bad enough having one taxman, but now we have two. It virtually invites tax evasion.”
Conservative finance spokesman Gavin Brown said: “Here we are in the toughest of economic times and the Scottish Government’s big wheeze is to create yet another quango. This is just more back-of-the-fag-packet policies from the SNP.”
The government has published a consultation on the new property tax. A consultation on the replacement for Landfill Tax will be published in the autumn.
It outlines two scenarios to replace the current system, which sees house buyers pay Stamp Duty of 1 per cent on the total price of houses worth between £125,000 and £250,000. The levy charged increases to 3 per cent for properties worth between £250,000 and £500,000, 4 per cent for properties up to £1m and to 5 per cent for houses worth between £1m and £2m. Those who can afford to buy a property of over £2m have to pay 7 per cent Stamp Duty.
The new system will differ in that property buyers will only have to pay tax on the portion of the price above the threshold.
The Stamp Duty replacement was welcomed by the property industry and leading business figures.
David Melhuish, director of the Scottish Property Federation, said: “Today’s Land & Buildings Transaction Tax announcement by the Scottish Government is a promising start on this important new tax.”
The Director of CBI Scotland, Mr Iain McMillan, said: “We welcome this move and will study the consultation carefully.”