The UK Government will scrap Stamp Duty in Scotland in 2015 and allow Holyrood to design a completely new set of property taxes and collection process, Scottish Secretary Michael Moore said today.
Mr Moore said with the Scottish Government indicating they will use the new Scotland Bill powers to depart significantly from the current UK Stamp Duty system, he urged them to set out their plans long before the switch off in April 2015 in order to ensure there were no late surprises for Scottish home buyers and builders.
The Scottish Secretary said starting from scratch with a new set of Scottish property taxes was one of the opportunities afforded by enhanced devolution but it also brought a responsibility to ensure the new system was fair as well as providing the revenue stream the devolved Government required.
The Scotland Bill, currently going through the UK Parliament, transfers control over Stamp Duty Land Tax to Holyrood. Revenue raised from this tax will remain in Scotland for use by the Scottish Government. The Scottish Government will be able to design a brand new land tax scheme including rates and thresholds, to fit with its objectives for the Scottish property market.
The Scottish Secretary today visited a housing development in Edinburgh where 111 new homes are being constructed by Hart Builders for the Port of Leith Housing Association. He discussed ways in which the new powers could be used to help home buyers and the construction sector in Scotland.
Michael Moore said:
“The Scotland Bill will give the Scottish Parliament the responsibility for land tax in Scotland. The Scottish Government have idicated they will depart significantly from the UK Stamp Duty system. That is entirely up to them and it is one of the opportunities afforded by enhanced devolution.
“They will want to consider, as the UK Government does at present, how best to shape the tax in order to help the likes of first time buyers, house builders, the environment and the overall economy. With a radical re-shaping expected I would urge the Scotish Government to start setting out their plans long before we switch off Stamp Duty in 2015 so that there are no late surprises for anyone.
“This shouldn’t be the silent hand over of tax powers at midnight in April 2015. This is a significant new power that it should be debated now so that the Scottish people and the housing sector can join in the make clear their views on how the system can change to meet their needs.
“People don’t benefit from devolving powers in principle: they benefit from using them in practice. So let’s start the debate on how this new power can best help people in Scotland.
“New powers bring new responsibilities and Ministers at Holyrood will need to ensure the new system works effectively and that it is fair.”
Stamp duty land tax (SDLT) is a charge on acquisitions of an interest in UK land, paid at a percentage of the consideration given for the acquisition. The Scottish Government will have complete control over the design and administration of the devolved taxes on land transactions in Scotland. Once SDLT has been “switched off” in Scotland, the Scottish Government may begin to charge the devolved taxes.
The Scottish Government may choose to levy taxes that are similar to SDLT but may equally choose to design each tax in a way that it feels better meets Scotland’s needs. The Scottish Government will not be able to levy their devolved taxes until SDLT has been disapplied. The Command Paper published alongside the Bill proposed that “switch off” should be in April 2015
Switching off SDLT in Scotland will be achieved by Treasury Order.
The Scottish Government has full control over the design and collection of the devolved taxes and will therefore need to decide who will collect them in the future. Under the powers contained in the Bill, the Scottish Government will be free to enter into an arrangement with a third party to collect the devolved land transaction tax and landfill tax, or it may approach a UK Government department such as HMRC to undertake the work.
HMRC estimates that, in 2009-10, 84,000 land transactions at over £40,000 (the notification threshold for SDLT) took place in Scotland. This amounted to 8.5% of total UK transactions. SDLT receipts from Scottish transactions are estimated at £250 million in 2009-10 (5.1% of the UK total).
See the table below for numbers of Scottish transactions and Scottish SDLT revenue in earlier years:
Number of Scottish land transactions at over £40,000
of total UK land transactions at over £40,000
Estimated Scottish SDLT Receipts
of total UK SDLT Receipts