Following the Chancellor’s UK Budget in November, Finance Secretary Derek Mackay introduced a number of changes on 14 December relevant to the property sectors in the Scottish Budget 2017.
Land and Buildings Transaction Tax (LBTT) – relief for first time buyers
Many were expecting a change to Land and Buildings Transaction Tax to provide a relief for first-time buyers similar to that introduced in England and Wales in the UK’s November Budget for Stamp Duty Land Tax (SDLT), the equivalent of LBTT in operation south of the border. The change to SDLT effectively removed the tax for first time buyers of residential properties in England & Wales up to a value of £300,000. For properties bought for between £300,001 and £500,000, no SDLT will be payable on the first £300,000, with 5% SDLT charged on the remaining balance up to £500,000. For purchases above £500,000, no relief is available.
The Scottish Government has confirmed that they will also introduce a first-time buyer’s relief. This will mean that first-time buyers purchasing a property worth up to £175,000 will pay no LBTT, while those with a purchase above this value will benefit from relief on the portion of the price below this threshold.
This means that the relief will have a maximum benefit of £600. The Scottish Government is predicting that this change will mean that 80% of first-time buyers in Scotland will pay no LBTT at all.
Unlike with the SDLT changes, however, the changes for LBTT do not come into force immediately and are planned for implementation in 2018/19 following a consultation on the policy.
It will be interesting to see the qualification criteria for the first-time buyers’ relief under LBTT and it is hoped that this level of detail will be revealed in the consultation. Currently the SDLT relief has a very narrow definition of “first-time buyer” which can leave some purchasing their first home without the benefit of the favourable tax treatment and one can hope that this will be simplified in the Scottish equivalent of the relief.
Scottish Landfill Tax (SLftT)
The Scottish Government has announced an increase in the Standard Rate of SLfT to £88.95 per tonne and the Lower Rate of SLfT to £2.80 per tonne in 2018-19, in line with RPI inflation and Landfill Tax charges in the rest of the UK.
New policies in relation to non-domestic (or business) rates will be introduced in 2018/19 which will include:
- A “Business Growth Accelerator” with the effect that any rates bill rises due to improvements or expansion of existing properties will not take effect until 12 months after those changes are made to the property;
- A new relief for day nurseries;
- An expansion of Fresh Start Relief to include all property types, halving the period the property has to be empty to qualify from 12 months to six; and doubling the level of relief from 50 per cent to 100 per cent for the first year of new occupation;
- A move to three-yearly revaluations from 2022 with valuations based on market conditions on a date one year prior; and
- A removal of charity relief from independent schools (not including universities or special schools).
The Scottish Government has also announced that they will continue the Small Business Bonus Scheme to assist with removing properties from business rates.
The Scottish Government has announced a Building Scotland Fund to assist in addressing the lack of affordable housing and the issue of homelessness.
This includes an investment of £756m in 2018-19 as part of a £3bn package over the course of the Parliament to help with delivering 50,000 affordable homes.
The existing Help to Buy and Open Market Shared Equity schemes will also be continue to be funded.
The Budget also included the establishment of a Building Scotland Fund with the stated aim of supporting construction jobs and to accelerate housing and industrial premises development and property-based research and development.
The Scottish Government also announced their preparation for the implementation of a Scottish National Investment Bank.
All of these changes will be subject to a successful passage of the Budget through Parliament and we expect that further detail on all of these changes will be revealed once the draft bill and respective consultations are published. We will continue to publish updates as this unfolds and Anderson Strathern have a large number of tax and property specialists who have are able to provide you with practical, commercial and tax-effective solutions to guide you through these new changes.