Hansard

As the minister has already said and as Liz Smith referred to, there was no consultation on part 2 of the bill. The Law Society of Scotland, which has proposed all the amendments in this group, had them ready to go, but, because there had not been consultation, it had not had the opportunity to put them forward. It therefore came along and suggested them at stage 2. That is broadly why the four amendments have been lodged. I will start with amendment 33, which is perhaps the most straightforward, and come back to amendment 32 later. Amendment 33 means that the provisions that were inserted by the Land and Buildings Transaction Tax (Group Relief Modification) (Scotland) Order 2018 apply to chargeable transactions in respect of which the effective date is on or after 1 April 2015. The amendments to the Land and Buildings Transaction Tax (Scotland) Act 2013 by the 2018 order were intended to make it clear that land and buildings transaction tax group relief would be available where Scottish share pledges were in place. However, the amended provisions applied to chargeable transactions after 30 June 2018 and could not be made retrospective to 2015. The Government accepted that at the time and said that it would introduce legislation at an appropriate point in the future. However, that is now six years ago. The need for the change has been broadly agreed to, so it is just a question of whether this is the appropriate bill to make it in or whether that should be done somewhere else. That highlights a point that Liz Smith has made many times. We need to have a mechanism whereby we can make relatively minor adjustments to existing tax legislation. You probably would not want a whole bill just for making such changes. However, this seems to be the first opportunity to make this change. I hope that the Government is willing to accept amendment 33. I would emphasise the need to consider whether we should have a finance bill to deal with such things annually or perhaps every couple of years. The commencement date of schedule 10 to the 2013 act was 1 April 2015. I understand that making the change would be of great assistance to taxpayers who entered into chargeable transactions before 30 June 2018 and had looked to claim group relief, but, where share pledges were in place, group relief was not in fact available. The point arises in practice, for example, in due diligence reviews that are carried out in advance of purchase transactions and would provide welcome legal clarity. Amendment 34, also in my name, gets a little complex. I am not a lawyer but will do my best. The aim of amendment 34 is to make clear that LBTT group relief is available on the transfer of a property to a company as part of a non-partition demerger—I had to look that up—where stamp duty relief under section 75 of the Finance Act 1986 is available on the subsequent transfer of the demerged company. The overall reason for amendment 34 is that LBTT has got out of line with what was intended under stamp duty land tax. There may be a question about whether that was intentional. If it was intentional, that is okay, but the Law Society’s assumption is that it was unintentional. The minister will comment on that. LBTT group relief is not currently available in such non-partition demergers—that is, in demergers where the same parties own both parts of the demerged business following the demerger. That is because paragraph 5(b) of schedule 10 to the Land and Buildings Transaction Tax (Scotland) Act 2013 provides that group relief is not available in a transaction in which the seller and the buyer are to cease to be members of the same group by reason of the buyer ceasing to be a subsidiary of the seller or of a third company. I will not quote the act. Paragraph 3 of schedule 10 provides that LBTT group relief “is not available if at the effective date of the transaction there are arrangements in existence by virtue of which, at that or some later time, a person has or could obtain ... control of the buyer but not of the seller.” However, paragraph 3 of schedule 10 is modified by paragraph 4, which provides that it does not apply to arrangements to which paragraphs 9, 10 or 10A apply. The effect of that is that, in a capital reduction demerger where property is transferred into a company that is then demerged, group relief on that transfer is not blocked by paragraph 3, provided that stamp duty relief under section 75 of the 1986 act is available on the subsequent demerger of the company to which the property is transferred. There is no similar modification to paragraph 5(b). Therefore, as currently drafted, LBTT group relief is not available in a non-partition demerger, even though stamp duty section 75 relief is available on the transfer of the demerged company. As I said before, the question is whether that was intentional. There is a similar issue in relation to the drafting of the provisions for stamp duty land tax group relief in schedule 7 to the Finance Act 2003, in which paragraph 2(1) is the equivalent to paragraph 3 of schedule 10 to the 2013 act for LBTT—it denies group relief if there is a change in control. Paragraphs 2(1)(a), (b) and (c) contain an exception where the arrangements are entered into with a view to a reconstruction where stamp duty reconstruction relief is available under section 75. Paragraph 2(2)(b) of schedule 7 to the 2003 act is the SDLT equivalent of paragraph 5(b) of schedule 10 to the 2013 act for LBTT. As with LBTT, there is no similar carve-out of section 75 relief transactions. However, the accepted view is that it is implicit in the SDLT legislation that the exception to the change of control provisions for section 75 transactions also applies to the degrouping provisions in paragraph 2(2)(b) of schedule 7. If it did not, there would be no point in the exception to paragraph 2(1), because it would always be overridden by paragraph 2(2)(b). There is quite an important point covered in the manual concerning SDLT from His Majesty’s Revenue and Customs. Revenue Scotland has indicated that it would not be possible for it to issue guidance that is equivalent to the guidance issued by HMRC. I was uncertain about that point and questioned it with the Law Society. At stage 1, we heard that Revenue Scotland considers that it cannot issue such guidance because it does not have the legal powers to do so. Perhaps the minister could comment on that. The effect of amendment 34 is to amend the LBTT group relief legislation to make it clear that paragraph 5(b) of schedule 10 to the 2013 act does not deny LBTT group relief on the transfer of a property to a company that is subsequently demerged in arrangements where section 75 relief is available.