New Scots property tax has been '˜operationally successful'

The introduction of a new property tax has been 'operationally successful' but it is 'too early to draw any definitive conclusions' on the change, MSPs on a key Holyrood committee said.

Glasgow properties with For Sale signs Pic: John Devlin

Members of the Scottish Parliament’s finance committee have been scrutinising the introduction of the Land and Buildings Transaction Tax (LBTT), which replaced stamp duty north of the Border in April 2015.

They have asked the Scottish Government to provide more detailed information on the impact of the new system.

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Finance Secretary Derek Mackay told the committee that nearly 9,700 homebuyers who would have had to pay stamp duty did not have to pay LBTT when buying a home, and that a further 41,700 paid less as a result of changes to the charges for properties costing between £145,000 and £325,000.

Now MSPs want to know the impact the change has had on the first-time buyer market, as there are no fees on properties worth up to £145,000, and if this has contributed to increased house prices.

They also suggested that the government’s review of the LBTT should consider if there is any behaviour response to the changes, particularly in relation to properties costing between £325,000 and £750,000, where the charges have increased.

Ministers have also been challenged to respond to claims from the Scottish Fiscal Commission that the housing market for more expensive homes, costing between £325,000 and £750,000 “remained subdued throughout the entire fiscal year excluding March 2016”.

Finance committee convener Bruce Crawford said: “It’s reasonable to say year one of the LBTT went smoothly and was operationally successful. That said, a key challenge for us has been the lack of consistency in the presentation of data relating to LBTT. That made it difficult to compare forecast and outturn data and to fully assess the tax’s impact on the property market in Scotland.

“There are also challenges in identifying ‘causality’ for the changes seen in the housing market – in short, it’s difficult, based on the data, to separate out the impact of LBTT rates and bands from extraneous factors, such as the general economic situation.

“Our committee therefore recommends that the Scottish Government’s review of the first year of LBTT includes an analysis of the behavioural response to LBTT, particularly in relation to homes costing between £325,000 and £750,000 This should include an assessment of the likelihood of an on-going response and an analysis of the impact of extraneous factors.”