Hansard

It is with pleasure that I speak on behalf of the Finance Committee in this stage 1 debate on the Land and Buildings Transaction Tax (Amendment) (Scotland) Bill. I thank the members of the Finance Committee, the clerks and those who gave evidence to help us to reach our conclusions expeditiously, along with our adviser, Professor McEwen, who produced an excellent summary of the responses while working to a particularly tight deadline.

Following publication of the UK autumn statement, in which the chancellor set out plans to introduce a 3 per cent stamp duty land tax supplement on the purchase of additional homes from 1 April 2016, the Scottish Government set out similar proposals in its draft budget. It has emphasised the need to introduce the supplement at the same time as the supplement comes into force in England and Wales in order to mitigate the risk of any related impact on the Scottish property market. That meant that the usual consultation process could not be undertaken and standing orders were suspended to facilitate a truncated timetable for parliamentary consideration of the bill.

The committee notes that those circumstances were far from ideal, but we recognise the reasons behind them and we accept there must be an element of flexibility in the scrutiny arrangements. In essence, there is a need to balance the risk of not responding immediately to UK tax changes and the risk of unintended consequences arising if we enact legislation without first conducting full consultation and comprehensive parliamentary scrutiny. The need to achieve such a balance is clearly an issue of real importance to Scotland’s public finances, and it might arise more frequently in future. We intend to reflect carefully before setting out in our legacy report recommendations on how best to balance the competing priorities.

We issued our own consultation, albeit that it was shorter than usual, and we received over 50 responses ranging from those from professional bodies to those from individuals who were concerned about the bill’s potential impact on their property dealings. We then took evidence from a range of stakeholders before hearing from the Deputy First Minister.

On the bill’s policy objectives, the key intention is to ameliorate market distortions that will potentially arise from the proposed UK supplement and have an impact on first-time buyers, in particular. Some stakeholders expressed concern that no impact assessment has been undertaken and that there is a lack of data on the Scottish second home and buy-to-let markets. We have therefore recommended that the Government commission research and take steps to improve the data on those areas.

Ministers should closely monitor the supplement’s impact on the housing market and conduct a comprehensive review when sufficient information is available. We also recommend that the Scottish Fiscal Commission provide a commentary on the first six months of the supplement’s operation, including on the impact of forestalling, by the end of November. I note that the Deputy First Minister said today that it might be more appropriate to wait until we have a full year’s data. We will deliberate on that.

We heard mixed views on the policy’s potential impact on first-time buyers. Some stakeholders expressed concern that the supplement would act as a deterrent to investment in new housing developments; others suggested that if the supplement is not introduced, investors from outside Scotland could push up property prices.

The committee recognises the Government’s policy intentions regarding first-time buyers, but we are also conscious of the need to protect housing supply for those who rent their homes through choice or necessity. We heard that the vast majority of landlords own fewer than five homes, with large numbers owning just a single buy-to-let property. Concern was expressed that the supplement might not deter investment in housing and might simply result in additional costs being passed on to tenants via higher rents. We consider it essential that the Government closely monitor the supplement’s impact on rent levels, particularly in areas where rents are already high.

To mitigate the possible deterrent effect on investment in Scotland’s housing stock, stakeholders suggested numerous reliefs. Unfortunately, it was not possible for us to scrutinise every proposal in the time that was available, and we remain conscious that exemptions and reliefs have the potential to provide loopholes and opportunities for tax avoidance. We therefore invite the Government to comment on stakeholders’ suggestions.

The committee was convinced of the case for introducing specific reliefs for registered social landlords, local authorities and student halls of residence. The availability of quality, affordable housing for people on lower incomes is a key challenge in Scotland, and we heard that many local authorities and registered social landlords have engaged in significant house purchase activity, which has helped to support the construction industry during the recent period of market recovery. It is clear that student halls of residence are designed in a way that makes them unsuitable for anyone who is seeking to buy a home. We therefore recommend that reliefs be introduced for those types of properties, which should mirror the reliefs that are provided for in the Land and Buildings Transaction Tax (Scotland) Act 2013.

We also support a relief for larger-scale investors who purchase six properties or more. Such a relief was proposed by numerous professional bodies and would be consistent with the provisions of the 2013 act, which provides:

“Where six or more separate dwellings are the subject of a single transaction ... those dwellings are treated as not being residential property”

for tax purposes.

The UK Government consultation seeks views on reliefs for bulk property purchases. We are mindful that the provision of such a relief south of the border but not in Scotland could adversely affect investment in the Scottish market. Furthermore, we consider it unlikely that such a relief would cover small-scale investors, who are more likely to be in direct competition with first-time buyers to purchase properties. Nevertheless, we remain mindful that the relief might need to be reviewed if there are signs of a negative impact on the number of new housing developments, due to a decrease in the number of buy-to-let properties being purchased by smaller investors.

We are also clear that a grace period should be provided to cover circumstances in which a purchaser temporarily and unintentionally owns two properties simultaneously as a result of a sale being delayed or falling through.

I am pleased that the Government has confirmed its intention to amend the bill to introduce such reliefs and I look forward to discussing the issues further with the Deputy First Minister at next week’s stage 2 proceedings.

The committee supports the general principles of the bill but remains conscious that, although the proposed supplement might appear relatively straightforward, a number of potentially complex issues remain, which will require careful consideration at stages 2 and 3.

In particular, there is a need to introduce appropriate reliefs that balance the needs of first-time buyers, the needs of people who rent their home and the interests of house builders and investors. That will not be easy, especially given the insufficient data on the current structure of the housing market in Scotland. It is therefore essential that the impact of the bill is closely monitored and a comprehensive review carried out when sufficient data are available.

I look forward to considering those important issues further at stage 2 and I look forward to hearing members’ speeches in the debate.