Lessons from Dragons’ Den about property sales - David Alexander comment

At the time of writing, a decision to bring an early close to the Scottish Professional Football League’s season in the Championship and Leagues One and Two was hanging in the balance.

It is not as if cutting middle- and higher-level LBTT rates need last in perpetuity, says Alexander. Picture: Yui Mok.

Reconstruction seems a logical option, but a bigger Premiership would make it difficult to accommodate four Old Firm games in a season. Still, the 12-member format means several clubs with financial and crowd potential spend a lot of time waiting in the wings.

For example, those former high-flyers Dunfermline Athletic or both Dundee clubs, whose Championship derby back in February attracted 12,500, easily beating many Premiership attendances over the same weekend.

Rather more clear-cut than the football situation is the opportunity for an important piece of reconstruction in the property sector.

Regular readers will be aware of my objections to LBTT, the property expert adds. Picture: contributed.

I am sure last week’s call by the Royal Institution of Chartered Surveyors for a stamp duty “holiday” on property transactions until the present crisis is over will be seconded by the organisation’s Scottish contingent, in fact even more so given that Land and Buildings Transaction Tax (LBTT) – the equivalent of stamp duty north of the Border – is even more onerous than the levy in England and Wales.

Personally, I would go much further than a “holiday” and aim for a full-scale reconstruction of LBTT rates.

Regular readers will be aware of my objections to LBTT as currently constituted: it makes buying a house more expensive in Scotland than in England and Wales and that it over-discriminates against the middle and upper ends of the market, cutting prospects for social mobility and harming the wider economy generally.

True, the current set-up has benefits for first-time buyers: only on sales of £150,000 and over does the tax apply and on those below £333,000, the tax is lower than on equivalent prices south of the Border. Even on a sale of £350,000, the tax is only £850 more than in England and Wales. But then the gap begins to widen sharply: on £375,000 Scottish residents pay £2,100 more; on £450,000 it is £5,850 more.

Bigger picture

Do you watch Dragons’ Den, which has just completed another run on BBC2? If so, you will be aware that it includes people who pitch good products and services – but lack commercial or financial nous. Often a Dragon will detect the bigger picture and come in with a life-saving offer but demand, say, 35 per cent of the business, when the owner wanted to give away only 10 per cent.

Yet, to my astonishment, many of these offers are turned down, the pitcher seemingly unable to grasp that ownership of 65 per cent of a successful business is infinitely better than 90 per cent control of a struggling one.

The current Scottish Government reminds me of these types. Let us take a residential property transaction worth £800,000, in which the respective LBTT/stamp duty levies are £54,350 and £30,000 – in other words £24,350 more expensive in Scotland. Over the past five years, I have come across many a potential sale at this and higher levels that have failed because of the size of the LBTT levy, whereas the English figure might have been more acceptable and allowed the transaction to complete.

So, using the Dragons’ Den analogy, would the government not prefer £30,000 of income from an £800,000 sale with tax applied at the English level of tax to no income from a sale made defunct by the size of the Scottish tax level?

It is not as if a reduction in middle- and higher-level LBTT rates need last in perpetuity. These could start to rise again at a later date as long as they did so in tandem with economic growth and the ability of people to pay.

During the financial services boom of the late 1990s and early 2000s, the Scottish Government might just have got away with present levels of LBTT on high-end properties – but that is certainly no longer the case. I would advise members of the Scottish Cabinet to spend some time during lockdown watching box sets of Dragons’ Den; they might learn something.

David Alexander is MD of DJ Alexander.

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