A new distinctly Scottish system of land tax will be a great improvement to the current UK wide system of stamp duty land tax, it is claimed.
As it will be based on Scottish conveyancing practice and will introduce a progressive rate of payment rather than the current slab structure it will be regarded as leading the way, according to the Law Society of Scotland.
The new Land and Buildings Transaction Tax will replace the current UK wide Stamp Duty Land Tax from April 2015. At present, stamp duty is applied at 1% for properties costing between £125,000 and £250,000 and 3% on those sold for £250,000 to £500,000.
As part of the Scotland Act 2012, the Scottish government will take responsibility for taxes on land transactions from April 2015 when the UK Stamp Duty Land Tax is replaced with the Land and Buildings Transaction Tax.
‘We very much welcome the introduction of a progressive tax structure, rather than the current structure which is perceived by many to be unfair due to the steep rise in tax for properties just above the thresholds,’ said Isobel d’Inverno, convener of the Society’s Tax Law committee.
‘This distorts the market by keeping prices artificially low and gives rise to avoidance under stamp duty land tax. We believe that this new progressive structure will eliminate these issues,’ she explained.
‘This proposed new tax has the potential to make a real improvement to the current system in Scotland. It is very much drafted in Scots law terminology, and reflects Scots property law and conveyancing practice,’ she pointed out.
‘The introduction of a much simpler regime for a land and buildings transaction tax will be of great assistance to solicitors and their clients and will make it much more workable and easier to administer,’ she added.
It is also welcomed by the Edinburgh Solicitors Property Centre (ESPC) which represents solicitor estate agents in Edinburgh, but it has some concerns, most notably that it could place a ‘significant financial burden on families’ in Scotland’s capital city and other areas with higher than average house prices.
The Bill must have an awareness of regional variations in the property market as currently a difference in property selling price of just £1 can lead to thousands of pounds in additional tax for the buyer, the ESPC said.
The ESPC suggested that the rate of tax increases in relation to selling price must be well balanced in order to allow people to move up and down the property ladder.