Committee
Finance and Constitution Committee 21 June 2017
21 Jun 2017 · S5 · Finance and Constitution Committee
Item of business
Subordinate Legislation
Land and Buildings Transaction Tax (Additional Amount-Second Homes Main Residence Relief) (Scotland) Order 2017 [Draft]
Thank you, convener. I aim to keep my opening remarks brief. An additional dwelling supplement liability arises when a buyer purchases an additional dwelling in Scotland and at the end of the effective date of that transaction, when mortgage funds are cleared and keys are handed over, the buyer owns two or more dwellings and is not replacing their main dwelling. In the context of the additional dwelling supplement legislation, “replacing” means selling the previous main residence and buying a new main residence. For the purposes of the additional dwelling supplement legislation, the Scottish Government’s policy is that a couple—by which I mean a married couple, cohabitants and civil partners—is treated as one economic unit. That is to address the risk of properties being moved between individuals for the purpose of tax avoidance. It is also the Scottish Government’s policy intention that, when the additional dwelling supplement is paid, it can be reclaimed when a main dwelling is being replaced and the sale of the former main dwelling occurs within 18 months of the purchase of what becomes the current main dwelling. As the additional dwelling supplement has become embedded, it has become clear that, in practice, the legislation has not worked as intended in relation to couples. Demonstrating that the Scottish Government is listening to taxpayers, the order before the committee this morning amends the legislation to address that issue for cases going forward. It does so in two respects. First, the order amends the current legislation to provide relief from additional dwelling second homes tax when couples jointly buy a dwelling-house but the dwelling-house being replaced is owned by only one of them. The second legislative amendment provides for the scenario when the transaction for disposal of the former main dwelling owned by one of the couple is concluded after the transaction for the joint acquisition of the new main dwelling. In short, the amendment will allow for a repayment of tax paid to the couple if the disposal happens within 18 months of the joint purchase of the new main dwelling. I am happy to answer any questions that members may have.
In the same item of business
The Convener
SNP
Item 2 is to consider a Scottish statutory instrument relating to the Land and Buildings Transaction Tax additional dwelling supplement. Before we come to th...
The Cabinet Secretary for Finance and the Constitution (Derek Mackay)
SNP
Thank you, convener. I aim to keep my opening remarks brief. An additional dwelling supplement liability arises when a buyer purchases an additional dwelli...
Murdo Fraser
Con
Thank you, cabinet secretary. You will know, because we have corresponded, that I have constituents who are affected, and I am sure that other members have s...
Derek Mackay
SNP
That is difficult to quantify. In fact, I cannot quantify it, because tax returns on LBTT do not ask for the specific information that answers that question....
Murdo Fraser
Con
I was just going to come on to that question of the retrospective remedy. I appreciate that the order will not solve that particular problem. My constituents...
Derek Mackay
SNP
Retrospectively? Going forward, Revenue Scotland will apply what Parliament approves. It will continue to apply the strict letter of the law that is currentl...
Murdo Fraser
Con
Do you want to expand on what you mean by that?
Derek Mackay
SNP
Not particularly. Laughter. I do not want to advise people to engage in any form of tax avoidance, but let us just say that different solicitors might have g...
Patrick Harvie
Green
The policy intention of the Government is still to treat couples in one way and to treat in a different way people who have a joint mortgage because, for exa...
Derek Mackay
SNP
This is a very specific mechanism to address what has been identified, rather than a wider point, and it looks at couples as one economic unit for the reason...
Patrick Harvie
Green
What is the reason for treating only couples as an economic unit and not, for example, two or more friends who have a joint mortgage because that is an affor...
Derek Mackay
SNP
That has not been raised with me previously, so I have not given it full consideration. The issue is about couples as economic units, minimising tax avoidanc...
Patrick Harvie
Green
So the Government might be open to looking at that in the future.
Derek Mackay
SNP
I do not want to trigger a much wider debate on what I am trying to resolve. I want to be clear and focused on the remedy that I am proposing today in return...
Liam Kerr
Con
On a point of clarity, the issue is about a policy intention that, for whatever reason, was not actioned correctly, so there is a group of people who have pa...
Derek Mackay
SNP
Yes. Revenue Scotland will undertake that work.
Liam Kerr
Con
It will presumably be given a due level of importance to ensure that people who have inadvertently paid are recompensed.
Derek Mackay
SNP
That is correct.
The Convener
SNP
As there are no other questions, we move to item 3, which is formal consideration of motion S5M-05994 on the order. Motion moved, That the Finance and Cons...
The Convener
SNP
The committee will publish a short report to the Parliament that sets out our decision on the order. That was the final piece of business on our agenda. The...