DCSIMG

Property tax shake-up ‘could cost millions and put off investors’

Picture: TSPL

Picture: TSPL

  • by MARK MCLAUGHLIN
 

A BID to prevent property developers dodging Scotland’s new land tax could cost the industry millions and deter investment, according to a major law firm.

The Scottish replacement for stamp duty land tax (SDLT) has been described as a historic first as it will allow the Scottish Parliament to both set and collect a proportion of its own revenue.

But a “little-noticed provision” could result in a “significant windfall” for the Scottish Government at the expense of developers, according to Pinsent Masons.

The law firm describes the provision as “a tax on business, jobs and investment”, and said it could deter investment in Scotland and inhibit economic development.

The SNP administration said its proposals are “revenue neutral”.

Alan Cook, a partner at Pinsent Masons, said: “There are numerous circumstances where an organisation might legitimately seek to acquire land and then move it on quickly.

“Developers will often agree to buy land and then sell off discreet parcels for development by others, which can in turn speed up the overall exploitation of land.

“In those circumstances, where an organisation has never actually held the land, the SDLT was only applied to the ultimate purchaser.

“Under the new rules, the tax could be applied at multiple points in a complex property project.

“That will generate additional cost for the developers and inhibit economic development when this is sorely needed. There are undoubtedly circumstances where this relief is being abused and that should be addressed.

“However, while Westminster appears to think that scrapping the relief would be an inappropriately blunt approach to fixing the problem, Holyrood appears to have no such reservations.

“Why should restrictions be applied in the hope that they will inhibit tax avoiders, but which also exclude those who should legitimately benefit.

“The approach to tax avoidance should be effective enforcement, not the withdrawal of legitimate mechanisms.

“Developers have to make choices about the locations where they will best deploy their financial resources, and there will be serious concerns that this could deter developers from directing those investments towards Scotland as it will offer a less competitive tax regime.”

A Scottish Government spokeswoman said: “Scotland already offers the most competitive tax rates for business anywhere in the UK.

“We have retained the small business bonus scheme, which has either eliminated or substantially reduced business rates for two out of every five commercial properties in Scotland and, even after proposed reform, empty property relief will remain significantly more generous than that offered in England and Wales.”

 

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