Scotland’s Land & Building Transaction Tax - its more radical replacement for stamp duty which still applies throughout the rest of the UK - has raised less revenue than anticipated by the Scottish Government according to Strutt & Parker.
LBTT came into effect on April 1 last year with the expectation that it would raise £235m in the first year. However, in the nine months until the end of 2015 it only exceeded its forecast revenue increase in one month, November, and is currently £34m behind what the Scottish Government hopes to raise.
“It is quite obvious that this tax is not working” claims Andrew Rettie, chairman of Strutt & Parker in Scotland.
“When the details of LBTT were announced last year we were very concerned that this would badly affect the top end of the residential market. There is no doubt that a house buyer in Scotland would feel it totally unfair that they would have to pay £24,350 more tax on a house costing £800,000 than someone south of the border”.
And this April there will be a three per cent LBTT surcharge introduced for those buying second homes and buy to let properties - exactly in line with the increase in stamp duty announced by George Osborne and applying to the rest of the UK.
Research into the profiles of buyers purchasing properties through Strutt & Parker's offices in Scotland show that the end of 2013 and throughout 2014 saw a peak in Scottish sales of secondary homes and investment properties.
There were six successive quarters in this period where more that 20 per cent of properties were sold for these purposes - it peaked at 27.5 per cent.
“Traditionally, there has been a keen demand for second and holiday homes in Scotland. Whether this is as an investment or holiday home, the sales of these types of properties are likely to be adversely affected. In addition, there has been little in the way of details released on this extra tax” says Rettie.
“For example we don't know if it will only be applied to people who already own a property in Scotland or if it is to cover buyers from all over the world. The Scottish Government needs to accept that LBTT is punitive and choking the residential markets”.
Meanwhile Scottish house sales surged in the final three months of last year, according to the Registers of Scotland; sales climbed year-on-year by 14.5 per cent in the third quarter of 2015-16, according to data just released.
A total of 28,779 properties were registered, which is the highest number for any quarter since 2008-09. House prices also rose by 1.6 per cent between October and December, to stand at an average of £167,734.