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Chamber and committees

Meeting of the Parliament

Meeting date: Tuesday, March 6, 2018

Agenda: Time for Reflection, Business Motion, Atrial Fibrillation, Topical Question Time, Climate Change (Emissions Reduction), Higher Education (Widening Access), Local Government Finance (Scotland) Order 2018 [Draft], Land and Buildings Transaction Tax (Relief from Additional Amount) (Scotland) Bill: Stage 1, Land and Buildings Transaction Tax (Relief from Additional Amount) (Scotland) Bill: Financial Resolution, Business Motion, Parliamentary Bureau Motion, Decision Time, LEADER Programme


Land and Buildings Transaction Tax (Relief from Additional Amount) (Scotland) Bill: Stage 1

The next item of business is a stage 1 debate on motion S5M-10795, in the name of Derek Mackay, on the Land and Buildings Transaction Tax (Relief from Additional Amount) (Scotland) Bill.


The Cabinet Secretary for Finance and the Constitution (Derek Mackay)

This is part 2 in this afternoon’s act. It will probably be a far more consensual debate than the previous one. It is a shame that Mr Simpson has departed from the chamber, because his use of the books of Dickens to characterise me has inspired the BBC. I hope that there will be no conjuring up of more such impressions of me in this debate, which will show what a reasonable person I am.

Just short of three years ago, the land and buildings transaction tax came into effect in Scotland, alongside the Scottish landfill tax. They were the first new national Scottish taxes to be introduced by a Scottish Parliament in more than 300 years.

Subsequently, in 2016, the Parliament approved legislation to introduce the LBTT additional dwelling supplement, which is a 3 per cent additional rate of tax that is applied to certain house purchases. The supplement applies where, at the end of the day that is the effective date of a transaction, a buyer owns more than one dwelling and the buyer is not replacing a main residence. Where the additional amount is paid, the legislation provides that it can be reclaimed when a main residence is being replaced and the sale of the previous main residence occurs within 18 months of the purchase of what then becomes the current main residence.

The introduction of the original LBTT legislation and the subsequent introduction of the additional dwelling supplement were important milestones on Scotland’s tax journey, but it is important to acknowledge and recognise that, on occasion, there will be a need for change. Tax is complex and it is inevitable that, at times, amendments will be required or desirable to improve operation, or for other reasons.

Reflecting that fact, the Scottish approach to taxation is founded in part on effective engagement and partnership working with stakeholders. It was as a consequence of that engagement, which included engagement with MSPs, that, last summer, I introduced secondary legislation to address a specific issue that had been highlighted in relation to the treatment of married couples, civil partners and co-habitants—referred to as an economic unit—in the ADS legislation.

The order that was approved by the Parliament in June 2017 addressed the scenario in which a couple jointly buy a new main residence, but only one of the couple’s names was on the title deeds of their shared previous main residence. Its effect was to ensure that relevant couples did not have to pay the additional dwelling supplement or could claim repayment of the supplement when their previous main residence was sold within the 18-month period.

Although the order addressed the issue for transactions that took place after it came into effect, it could not apply to transactions that had taken place previously, and members of the Finance and Constitution Committee and stakeholders rightly raised that as a concern during their scrutiny of the order.

The Scottish Government agrees with that view, so it has introduced the Land and Buildings Transaction Tax (Relief from Additional Amount) (Scotland) Bill to deliver parity for all taxpayers, regardless of the effective date of their transaction. The bill is single-minded in its focus and scope, in that it serves solely to give retrospective effect to the provisions of the 2017 order. I thank the Finance and Constitution Committee for its scrutiny of the bill, and I welcome its support for the bill’s general principles.

I recognise, of course, that stakeholders have raised a number of other issues around the additional dwelling supplement and the approach to devolved taxes more widely. I welcome their input and engagement and take seriously the points that they have raised. I assure members that, although they are outwith the scope of this bill, the issues that were raised in the submissions will be considered. However, many of the asks would involve a much more significant amendment to the legislation, so they will require further attention.

On the issue of group reliefs specifically, I intend to bring forward a consultation on draft secondary legislation to address for future transactions the concerns that stakeholders have raised. Such legislation would deliver parity of approach between LBTT and stamp duty land tax in this area.

Murdo Fraser (Mid Scotland and Fife) (Con)

I welcome what the cabinet secretary has just said about group reliefs. I do not know whether he is familiar with the Law Society of Scotland briefing that was issued for this stage 1 debate, but it sets out a number of examples of other areas in which people buying houses together might inadvertently become liable to the additional dwelling supplement. Does the Scottish Government have any plans to look at those areas as well to see whether they require to be addressed by legislation?

Derek Mackay

I appreciate the intervention, but I do not want to give any views today that are wider than the purpose of the bill and further to what I have said already. However, I reiterate that I will consider and reflect on all submissions.

There is a very strong argument—maybe the budget process review group has assisted us with this issue—about the fact that Westminster has the ability to refine tax legislation as appropriate but we do not have that function in the Scottish Parliament. There is an increasingly strong case for the Scottish Parliament having such a function to address certain matters without having to take the legislative route that we otherwise have to go through. That is certainly worthy of consideration.

In the bill, we are taking action on a specific technical issue as a result of engagement on that issue, not least with Murdo Fraser. Given that context, the bill is therefore non-contentious and I hope that it will be supported across the chamber and across the tax community. All other considerations on land and buildings transaction tax will be considered in a timely and appropriate manner as part of our overall approach to the planning and management of devolved taxes.

I look forward to the debate, but I am very curious as to how we will fill the next 40 minutes.

I move,

That the Parliament agrees to the general principles of the Land and Buildings Transaction Tax (Relief from Additional Amount) (Scotland) Bill.

I call Bruce Crawford to speak on behalf of the Finance and Constitution Committee.


How long do I get, Presiding Officer?

Five minutes, Mr Crawford.

Bruce Crawford

Okay. Thank you.

It is my pleasure to speak as the convener of the Finance and Constitution Committee. I put on record my thanks to my fellow committee members for the constructive manner in which they went about their deliberations on the Land and Buildings Transaction Tax (Relief from Additional Amount) (Scotland) Bill. I also thank the clerks, particularly Alan Hunter, who supported the committee so well during our deliberations. If only other aspects of the committee’s workload were as straightforward to navigate.

On the subject of Dickens’s characters, perhaps on this occasion Derek Mackay is Samuel Pickwick, who is said to have been

“Benevolence personified ... entirely human and credible ... Decent and determined”.

Perhaps he is the most appropriate character from Dickens as far as this bill is concerned. I had better get on now with the rest of my speech.

I highlight by way of background that, following the devolution of certain powers over taxation as a result of the Scotland Act 2012, our predecessor committee scrutinised plans to introduce the land and buildings transaction tax from April 2015. Since the implementation of LBTT, a number of changes have been made to the Land and Buildings Transaction Tax (Scotland) Act 2013, with perhaps the most significant being the introduction of the additional dwelling supplement in April 2016. That meant that individuals or couples purchasing a second residential property would be liable to pay an additional tax charge. Exemptions were put in place, though, to ensure that such buyers were not inadvertently left out of pocket—for example, by legislating to entitle people to claim a refund where they temporarily owned two dwellings while waiting for their original property to be sold.

However, it became apparent that the legislation had been drafted too tightly, which had the unintended consequence that couples in certain circumstances were treated as a single economic unit when determining whether the supplement should be levied but not when determining whether they should be reimbursed. I know that that issue has been raised with MSPs across the country. To address that anomaly, the Government laid a statutory instrument, which the committee considered and endorsed in June last year. At that time, the cabinet secretary confirmed that it was not possible for the secondary legislation to apply retrospectively, meaning that a small number of couples who had already paid the supplement were unable to claim it back. The cabinet secretary undertook to consider other legislative vehicles to effect the change, and the bill that we are debating today is the direct result of that undertaking.

Although the committee fully supported the policy intentions of a bill that is understandably narrow in scope, stakeholders raised a number of additional issues in written evidence. I will briefly address some of those comments and suggestions.

A recurring point was that the data provided to Revenue Scotland does not allow it to proactively identify taxpayers who are eligible to claim reimbursement of the supplement. The cabinet secretary acknowledged that and explained that the legal world would be well aware of the bill and would raise awareness among clients, while Revenue Scotland would publish information on its website to raise awareness and explain how to go about submitting a claim. However, the cabinet secretary accepted the fair point that attempts should be made to identify eligible taxpayers. The committee therefore invited Revenue Scotland to consider what further steps it would take to identify such people. I am grateful for its considered response, which explains that, although it is not possible to do that, it intends to use a wide range of communications activity to raise awareness of the change.

The committee is also mindful of the potential impact on the overall LBTT tax take of refunds that arise from the bill. Although the impact is likely to be relatively small, we have invited the Government to provide updates on the number of repayment claims that are made and the amounts that are repaid.

I put on the record the committee’s appreciation for the constructive engagement that we have had with the cabinet secretary and his officials in supporting our scrutiny of the bill. I welcome the comments that he made in his opening speech and the contents of his letter of 5 March in response to the committee’s stage 1 report, as well as his letter to the committee today about the group relief consultation announcement, which I think we all welcome.

The committee recommends the general principles of the bill to the Parliament.


Murdo Fraser (Mid Scotland and Fife) (Con)

I start by reminding members of my entry in the register of members’ interests, which shows that I am a member of the Law Society of Scotland.

Following on from the convener of the Finance and Constitution Committee, I fear that we might be in for a contest this afternoon to see who can come up with the Dickens figure whom the cabinet secretary most corresponds to. I give you, Presiding Officer, Mr Micawber from “David Copperfield”, who is described as

“always in debt yet recklessly cheery and blindly optimistic”.

I ask colleagues to beat that if they can. [Laughter.]

On behalf of the Scottish Conservatives, I welcome the Land and Buildings Transaction Tax (Relief from Additional Amount) (Scotland) Bill. The finance secretary knows that I have constituents who were caught in the very circumstances that the bill attempts to redress, and it might be helpful to the Parliament if, without giving their names, I narrate the circumstances of the case as an illustration of why the bill is important.

In the case of my constituents, we had a young couple who had recently married. They lived in a property that the husband had owned prior to the marriage, which was therefore in his sole name. The wife did not own any property. In time, they decided to move to a larger property, which was purchased in their joint names, as is the normal practice. The entry date for the new property was a few weeks prior to the entry date for the sale of the existing one, so there was a short overlap. There is nothing unusual in that. That led to them paying an additional dwelling supplement on the purchase price. If I recall correctly, the sum was about £13,000, which represented a substantial financial commitment. Nevertheless, they fully expected that the sum would be refunded to them in the normal way after the sale of the first property, as they were second home owners only on a short-term and inadvertent basis.

I am sure that members can imagine their horror when they discovered that Revenue Scotland was claiming that the additional dwelling supplement was not repayable in their case. They had never budgeted for an additional £13,000 and had no idea how they would meet that additional charge.

As the cabinet secretary has pointed out, the problem was that, as a result of the way that the original legislation was drafted, only the husband was treated as replacing a main residence. Because the wife did not have her name on the title deeds of the original property, she was not treated as replacing a main residence and therefore, on the strict interpretation of the legislation, ADS could not be reclaimed on the sale of the first property by the husband.

It is clear that such a situation was never the policy intent of the original legislation. ADS was introduced as a revenue-raising measure to produce tax from those buying a second property, or more properties, either for investment purposes or as a holiday home or other residence. It was never intended to be a tax on those who were simply replacing their main place of living. Yet, due to what is essentially an error in the way that the original legislation was drafted, couples such as my constituents were inadvertently caught by it.

I drew my constituents’ case to the finance secretary’s attention, as I am sure that other members did with similar cases, and I am pleased that the Scottish Government acted very swiftly. A statutory instrument was brought in last year to resolve the problem for new purchasers after June 2017. Primary legislation was required to give retrospective relief to those who were caught during the period from the introduction of ADS—1 April 2016—until June 2017, hence we have the bill before us. It is a timely and very welcome bill, and it will be much appreciated by the individuals who are caught in the situation that I have just outlined.

I would like to raise two other minor issues in relation to the bill before us. First, we have to make sure that all those who would benefit from this bill are aware of its passing. I raised that issue with the cabinet secretary when he came to the Finance and Constitution Committee, and indeed the committee convener just referred to it in his opening speech. There is a particular case for Revenue Scotland to engage with the Law Society of Scotland, which will be best placed to be aware, through its member companies, of the cases affected. It can then be ensured that everyone is aware that the legislation has been passed, so that those who are able to reclaim ADS can do so.

The other point relates to separate issues in connection with LBTT, which were raised in evidence to the committee by the Law Society and the Institute of Chartered Accountants in Scotland. Adjustments to the LBTT ADS regime would be beneficial in a number of other areas, for example, in relation to the transfer of investment properties to pension funds or in relation to LBTT group relief where share pledges are involved. I welcome the fact that the cabinet secretary has this afternoon published a letter saying that he is prepared to consult on the latter matter, which takes us forward in a very helpful fashion.

The suggestion has also been made that an annual finance bill in the Scottish Parliament could deal with the minor tidying up of matters such as those. It would be very welcome if the Scottish Government were to consider that suggestion.

I reiterate that the Scottish Conservatives will support the bill before us at stage 1 this evening. I hope that it becomes law as quickly as possible, and I know that there are constituents of mine who will be very grateful if it does.


James Kelly (Glasgow) (Lab)

There have been a number of heated debates and exchanges over the past of couple months, mainly over the budget and certainly between me and Mr Mackay. I want to make clear at the outset of this debate that I fully support the proposals that have been brought forward on the land and buildings transaction tax. I commend Mr Mackay for his approach in listening to stakeholders and to the issues that were raised by committee members—principally Murdo Fraser—and for bringing forward corrective action. It is very welcome.

The purpose of the land and buildings transaction tax was to levy a tax on those who purchase property. In the original legislation, the approach was to treat couples, including those in civil partnerships or who are cohabiting, as one domestic unit, in order to seek to ensure that people were not avoiding tax. That seemed a reasonable approach.

However, as other members have outlined, if people sought to claim relief from the ADS where they had purchased a property and sold one in the previous 18 months, they were caught by inconsistent treatment, which is against the principles of fair taxation. In addition to the changes that were introduced by order last year, the bill addresses, retrospectively, the position of those who were caught by the policy prior to May 2017, which, again, seems a reasonable approach. I am encouraged by the fact that the bill has been well supported by the stakeholders who engage on this issue, including the Law Society of Scotland and those who participate in the relevant forum.

The financial memorandum states that the bill will have a financial impact of between £655,000 and £1.55 million. Although that is a relatively small amount as regards the overall budget, it will have an impact on it and it will be interesting to learn from the cabinet secretary where that will be drawn from.

Some of the responses that were made to the consultation on the bill introduced other issues relating to how we, as a Parliament, might better manage taxation. It is right to look at such issues—particularly given that, as we now have increased tax powers, more such technical issues might come up and require to be tidied up. It seems reasonable to look at the idea of an annual taxation bill through which we can tidy up any unintended consequences.

The measure that we are debating today is a necessary one. I commend the work that has been done by the Finance and Constitution Committee’s members, witnesses and clerks. I also commend the cabinet secretary for introducing appropriate legislation to correct the loophole and ensure that those who have been caught unfairly by the way in which the original legislation was drafted can seek appropriate redress.

We move to the open debate.


Willie Coffey (Kilmarnock and Irvine Valley) (SNP)

The title of the bill may prove to be almost as long as the time that is taken to consider and approve it. As the cabinet secretary, the convener and members have reminded us, the Land and Buildings Transaction Tax (Relief from Additional Amount) (Scotland) Bill seeks to correct an unintended consequence of the Land and Buildings Transaction Tax (Scotland) Act 2013.

When LBTT tax replaced SDLT in Scotland in 2015, a percentage of the value of the house, which varies depending on that value, became payable in tax. In 2016, the ADS came in, and its purpose was to charge an additional 3 per cent of the value of the house if it was a second home. The intention was that the ADS would apply if one spouse owned an existing home and their spouse bought a second home, but that it would not apply if the buyer was replacing their original home. Of course, the unintended consequence was that certain couples who bought another house, replacing their original home, were still being charged the ADS because the name of only one spouse was on the title to the first house. That was not the policy intention behind the ADS. It is hugely important that, as a Parliament, we listen when well-meaning action that we take can be improved and that we act accordingly. The bill simply seeks to correct that problem and to allow a retrospective claim to be made for the return of the ADS in such cases.

The financial memorandum that accompanies this short bill estimates a likely increase of somewhere between 2 and 5 per cent in the number of joint buyers intending to claim back the tax, provided, of course, that they are able to dispose of the original property within 18 months. On average, the value of each ADS transaction is thought to be around £8,000. As James Kelly pointed out a moment ago, the overall cost is estimated to be somewhere between £600,000 and £1.5 million, which I understand is to be met from within existing resources. The bill will not therefore have a huge impact on the Scottish budget. No doubt, the measure will be welcomed by those who are affected by it.

In terms of the overall impact of the land and buildings transaction tax and its performance, more than 90 per cent of home buyers pay less tax or no tax at all compared with the situation under the predecessor stamp duty land tax. Further, it has helped to keep more than 25,000 houses out of tax altogether by setting a threshold of £145,000, which means that there is no charge until that figure is reached.

We ought to welcome the progress that has been made through the LBTT as it involves home buyers paying a fairer amount of tax and gives them a helping hand by saving them money. At the upper end of the market, data from Revenue Scotland tells us that house sales are continuing to rise annually by about 18 per cent, and the Scottish Government is committed to monitoring the performance of the tax across all the bands. I note the cabinet secretary’s announcement that the Government intends to consult on group relief, which is an issue that was raised by quite a number of stakeholders.

The bill is a welcome correction to an unforeseen effect that unintentionally but unfairly taxed some house purchasers. It addresses that and will allow those house buyers to reclaim the tax that they paid on the purchase of their house. I support the Scottish Government’s motion.


Bill Bowman (North East Scotland) (Con)

I refer members to my entry in the register of members’ interests with respect to my membership of the Institute of Chartered Accountants of Scotland. I also warn members that my speech will contain some repetition of what others have said.

I thank the cabinet secretary for bringing the bill forward—it is both welcome and necessary. An anomaly in relation to the additional dwelling supplement meant that it was chargeable when spouses, civil partners and cohabitants jointly replaced a home that was owned by just one of them. It is right that we now apply last year’s action to end that anomaly retroactively.

I echo Murdo Fraser’s point regarding advertising the change. I appreciate that Revenue Scotland cannot identify those affected and will advertise the change on its website. However, that does not seem wholly sufficient. Can the cabinet secretary clarify whether any third parties, such as professional bodies or estate agencies, have been contacted in relation to notifying the public of the change?

As welcome as the latest fix is, it only scratches the surface. The Law Society of Scotland has highlighted several additional anomalies with the ADS in its submission to the Finance and Constitution Committee. One of those additional anomalies relates to couples who are separating. In situations in which one partner goes on to buy a new home, relief is not available. Equally, there is no relief for couples who were not previously living together prior to purchasing a joint property. Neither situation seems fair, and those who are caught up in such cases might feel that they are being penalised for circumstances that may be outside their control. Nor is it fair that the SNP’s land and buildings transaction tax contains no dependent dwelling exemption, as stamp duty land tax does in the rest of the United Kingdom. It is more than reasonable to consider that the purchase of a property with another connected to it should be considered as an overall single transaction rather than as the purchase of an additional residence.

We should not address such issues in isolation. The bill is welcome, but it is narrow and cumbersome. A lot of time and effort has gone into ending one relatively small, though significant, anomaly in a specific aspect of one particular tax—a case of deficient SNP legislation leading to a deficient fix, leading to yet another fix. A new approach is needed, and I think that the cabinet secretary alluded to that in his speech.

Derek Mackay

Is it not fair to reflect on the fact that the Parliament as a whole passed the legislation, and to acknowledge that the right thing for the Government to do is to engage with parliamentarians and stakeholders and, where possible, remedy any issues that require to be remedied? For the Government to have taken any other course of action would have meant that there would be no satisfactory resolution for those who have been caught up by the issue. The matter is not necessarily one of parliamentary fault. Whether it is a matter of legal interpretation, enforcement or whatever, surely the Parliament is doing the right thing.

Bill Bowman

The Parliament is doing the right thing, but there are issues around the method used in doing the right thing—that is what I am going to talk about.

Revenue Scotland should play a more prominent role in administrative policy changes, mirroring the relationship between HM Treasury and Her Majesty’s Revenue and Customs.

The introduction of an annual finance bill would give the Parliament a formal opportunity to review and revise tax policy, which is a position that is backed by respected bodies such as the Institute of Chartered Accountants of Scotland, the Chartered Institute of Taxation, the Scottish Property Federation and the Law Society of Scotland.

Surely the finance secretary would prefer his legacy—when the time comes for a legacy, that is—to be that of a reforming finance secretary. The very issue that we debate today demonstrates the need for a formalised review process. As the Scottish Property Federation noted, there was

“very little opportunity for detailed scrutiny”

of the legislation on the additional dwelling supplement. This is perhaps a timely reminder for SNP members of the dangers of rushing legislation through the Parliament, only for that legislation to come back and hit them later. An annual finance bill would signal that the Parliament is serious about using its evolving tax powers in a considered and fair manner. The Parliament is maturing, and its approach to tax policy must mature, too.

When we take decisions on how much of people’s hard-earned money to collect from them and on how we spend it, people must have confidence in our decisions. The public whom we serve deserve no less.


Neil Bibby (West Scotland) (Lab)

I support the bill. Like Bill Bowman, I am likely to repeat what other members have said.

The cabinet secretary and others have set out the details of what the bill will achieve. It is unusual to introduce and pass retrospective legislation but, in this case, it is absolutely the right thing to do. The bill corrects an anomaly and an unintended unfairness that was introduced by the Land and Buildings Transaction Tax (Amendment) (Scotland) Act 2016. At the time, the Scottish Government’s intention was clear: it wanted to levy an additional tax on those who purchased a property in Scotland and who already owned another property. Rightly, the Scottish Government recognised that a situation can often arise in the purchase of a property whereby an individual or a couple become, for a short period, the owner or owners of two properties. That is why, as has been said, a period of grace of up to 18 months was introduced, in which, if the person or couple purchasing a second property then disposed of their first property, they were able to reclaim the additional amount of LBTT that had been paid.

However, as other members have said, it has become clear that, in trying to ensure that married couples, civil partners and cohabitants do not move property between individuals for tax avoidance purposes, the anomaly or unintended consequence to which I previously referred has been created. The Parliament has legislated for a situation whereby spouses, civil partners and cohabitants are liable—as a single purchaser would be—for the additional taxation when jointly buying a home to replace a home that was owned by only one of them. As other members have said, such people were subject to the additional dwelling supplement if only one name was listed on the deeds. However, unlike a single person or a couple who were both listed as owners of the original property, those who were not listed as owners of the original property but were listed as joint owners of the new property not only became liable for the additional tax but, unfairly, could not reclaim that tax if the original property was disposed of within 18 months. It is only fair, therefore, not just to address that anomaly for all future purchases but to compensate those who have been unfairly charged since the ADS was introduced.

Everyone accepts that the easiest way to address such anomalies is by the use of secondary legislation. Unfortunately, retrospective legislation cannot be effected by secondary legislation unless there is a specific expressed power, which, in this case, does not exist—hence the bill, which has cross-party support and the support of key stakeholders. Although I support the bill, I will highlight wider concerns that were brought to the attention of the committee by those key stakeholders. As we have heard, the Law Society of Scotland has highlighted that the bill will not address other changes to LBTT that it believes are urgently required. I accept that there is no opportunity to do that here, but I hope that the cabinet secretary will reflect on what the Law Society has said and come back to the Parliament with suggestions about how that can be looked at in the future.

I have referred to anomalies and unintended consequences, and it is worth reflecting on another relevant issue that was raised by the Chartered Institute of Taxation, the Law Society, the Scottish Property Federation and the Institute of Chartered Accountants of Scotland, which is that there should be a way of addressing technical issues that occur in our new devolved tax system. As James Kelly and others have said, the idea of an annual Scottish finance or tax bill is a good one; I therefore ask the cabinet secretary for a commitment that the Scottish Government will fully consider that.

If the Parliament decides that retrospective legislation is needed to address an anomaly, it would be pointless if the intended beneficiaries of that legislative change were unaware of their entitlement to claim a refund. I accept arguments against engaging in an expensive publicity exercise, but I hope that Revenue Scotland can make detailed proposals about how those who are affected will be identified and notified. As has been said, the legal world and the Law Society have an important role to play. Those who are affected will inevitably have instructed a solicitor, so I suggest that the Law Society be encouraged to encourage its members to identify clients who fit the relevant profile in the identified period and to contact those clients to make them aware that there has been a change that could benefit them.

Although the bill is unusual in that it proposes to have a retrospective impact, it is straightforward, has unanimous support and will address a small but significant unfairness. I therefore support the committee’s recommendation that the bill be supported.


Ivan McKee (Glasgow Provan) (SNP)

I draw members’ attention to my entry in the register of members’ interests with respect to rental of a property.

I will keep my speech short and give you some time back, Presiding Officer, at the risk of repeating what everyone has said up to now in what has been an extremely consensual debate. The tone of the debate makes a welcome change and provides a bit of a respite from the usual debates in this place that involve matters financial and constitutional, which are more akin to multidimensional trench warfare. It is nice to get the equivalent of a break in which to go and play football in the snow before hostilities resume again tomorrow with the debate in committee on the UK Withdrawal from the European Union (Legal Continuity) (Scotland) Bill.

The Land and Buildings Transaction Tax (Relief from Additional Amount) (Scotland) Bill tidies up an anomaly with respect to retrospective relief. The original legislation provided, in relation to the additional dwelling supplement, that couples be treated as one economic unit to avoid the potential for tax avoidance by individuals moving property between themselves. It clearly did that, but it also created a specific anomaly whereby, if the old property was in the name of one of the individuals and the new property was in both names, they both fell liable for the tax, in effect being treated as one economic unit when the ADS was payable but not when the ADS was being repaid. I welcome the fact that the Government has listened to the concerns that have been raised and that the cabinet secretary has introduced the bill to address that anomaly.

Estimates vary as to the total amount of tax that will be reclaimed, as Mr Kelly mentioned, but the figure will come to between £650,000 and £1.5 million. Although that is not a significant sum in the scope of the Government’s finances, we could be talking about a significant amount of money for the individuals concerned, as Mr Fraser said, and they will be glad to see it coming back to them.

Other issues have been raised during consideration of the bill. It is good to see that the cabinet secretary is giving group relief some consideration, with the opening of a consultation on that matter, and I hope that other anomalies that have been raised by the Law Society will get some review as well.

Bruce Crawford

Does Mr McKee agree that, with regard to an annual finance or tax bill, perhaps Bill Bowman should go off and read the report of the budget process review group, which covered that area quite extensively? Indeed, it recommended to the Government that a finance bill should be examined and that any recommendations should be brought forward by the end of the current session of Parliament. The cabinet secretary responded quite positively to that suggestion.

Ivan McKee

That is exactly the point that I was going to raise next. We should welcome consideration of a finance bill and see whether that is possible. It is a shame that Mr Bowman did not get the memo about the suspension of hostilities before making his earlier remarks.

It is great that the Government has listened to people’s concerns about the issue and taken them on board, and that it has introduced a bill to make the required changes effective. The Finance and Constitution Committee in its entirety welcomes the bill and has given consensual support for it, and we will be glad to see the bill passed in due course.


James Kelly

Bill Bowman, Neil Bibby and Ivan McKee all expressed concern that they might be repeating some of the points that others had made, and they must feel sympathy for those of us who have to speak twice in the debate, as there is a real danger that we could be appearing on UK Gold soon.

There has been a strong element of consensus in the debate, which is right because the anomaly in the original legislation will be corrected by the proposed legislation that the cabinet secretary has introduced. If the bill is passed, those who have been unfairly affected will be able to claim appropriate retrospective relief.

Members have raised issues that have been brought up in responses from the Law Society and other organisations about extending the areas that are covered by the legislation in terms of group relief. Bill Bowman gave the example of couples who have separated, and that situation should be seriously looked at.

However, there should be an element of caution. Ultimately, it is a tax-raising measure, and tax has to be raised fairly. If there is unfairness in the system, I expect that to be ironed out. Nevertheless, we do not want to get into a situation in which we build in so many exemptions that we lose the effectiveness of the tax-raising measure. It must contribute to the budget—everyone feels strongly about that, no matter what their point of view on it.

In committee, Murdo Fraser raised the issue of the awareness campaign. I appreciate that it is difficult because, according to the analysis, the measure will potentially affect between 76 and 189 people, which is a small number. I understand the cabinet secretary’s caution about Revenue Scotland or any other organisation launching a major advertising campaign. What is needed is some innovation. A lot of the bodies will know particular individuals who might be affected and they can communicate with them.

Social media could also be skilfully used. Those of us who use social media as part of our political campaigning are well aware that, by putting a small bit of money into, for example, advertising on Facebook, we can reach a wide audience. That might be something for Revenue Scotland to look at.

The other main point from the debate, which I raised in my earlier speech and which Neil Bibby underlined, is the need for an annual finance bill to deal with technical tax changes. That makes good sense.

Overall, the debate has provided a consensual end to the afternoon, even if the start was not consensual. Members on the Labour benches support the Government’s approach on this.


Alexander Burnett (Aberdeenshire West) (Con)

I thank my fellow committee members for the constructive conversations that we have had on the bill, and I look forward to continuing our work as we scrutinise this piece of legislation. In addition, I echo the thanks of our convener to our clerks and to those who have submitted evidence to the Finance and Constitution Committee.

I refer members to my entry in the register of members’ interests, particularly with regard to my businesses that deal with the purchasing and leasing of residential properties and businesses, which are impacted by LBTT.

The Scottish Conservatives agree with the bill and welcome its introduction at stage 1. As many members have pointed out, the need for the bill is the consequence—and another example—of an SNP Government pushing through bad legislation that requires further legislation to correct it. The irony, as we argue over the timings that have been proposed by the SNP for the UK Withdrawal from the European Union (Legal Continuity) (Scotland) Bill, makes it particularly topical.

From the evidence that has been taken, it appears that the bill will not be the final piece of correcting legislation that is required. As my colleague Murdo Fraser noted, the proposed legislation is required to correct the injustice that has been done to many constituents who were simply starting a home together. As has been pointed out, many experts noted, during discussions on the original legislation, that they had grave concerns over its impact on the housing market as well as its other potential consequences.

Those concerns have been borne out by the facts. The estate agent Aberdein Considine’s analysis last December showed that selling prices in Glasgow’s east end had risen by 20 per cent in the previous quarter. The Times reported last Friday that

“first-time buyers without extra capital are being consistently outbid by”


“investors from China”

and the middle east. I do not want to deter international investment, but legislation that the Scottish Government introduces should not be to the detriment of our own residents who look to make a life and home of their own.

The bill also affords the opportunity to consider the wider issues that we face with LBTT. The Law Society noted that

“there will continue to be regular issues that arise in relation to the implementation of devolved taxes”.

Therefore, it encourages Revenue Scotland and the Scottish Government to work together in a policy partnership to ensure that the Scottish tax system is responsive and fit for purpose as it develops.

As the Institute of Chartered Accountants of Scotland states, there is a good case to be made for care and maintenance measures in the existing tax law so that, if stakeholders find that parts of the legislation do not work as intended, there is an opportunity to revisit the law without the need for primary legislation.

I note and welcome the letter that the cabinet secretary sent to the committee shortly before the debate, introducing a consultation on group reliefs. I hope that he will continue to be as receptive on other issues.

We have a duty to pass bills that work effectively and that benefit our constituents to the maximum effect the first time round. Therefore, although we support the consensus in passing the bill to the next stage, I ask the cabinet secretary to cover in his closing speech his response to the further amendments to the land and buildings transaction tax legislation that the Law Society and others have proposed.

I call the Cabinet Secretary for Finance and the Constitution to conclude the debate.


Do I have until about 5 o’clock, Presiding Officer?


Derek Mackay

Thank you very much. I will conclude the debate briefly by answering a number of points that have been raised.

I imagine that, of all the devolved taxes, the scale of the financial issue that we are discussing is not such that it would give me any cause for concern.

In terms of raising awareness of the issue, although Revenue Scotland cannot proactively pursue the people whom it thinks might be eligible for the refund, solicitors and others can proactively go back to their clients and, I hope, help people to get redress. I suppose that, like many MSPs, Murdo Fraser will enjoy writing a letter to constituents to say, “See that £13,000 bill that you were taxed with? Because of the consensus in Parliament, you are now no longer liable for it and can claim it back.” What a dream it is for a Tory to write such a letter! In fact, any member who has had such a case can write back in those terms; MSPs have a responsibility as well.

In all seriousness, I appreciate the tone of the debate, the constructive suggestions and the support for the action that will be taken to ensure that we address the issue. Having addressed it through the order, we will also be able to address it retrospectively through the bill.

I do not often hear from James Kelly the words “I commend Derek Mackay”, but I liked that and hope that we can hear more of that in future. On that note, if there is parliamentary consensus that we require an annual finance bill to address some of the month-to-month or year-to-year finance issues, that is welcome. Bruce Crawford, the convener of the Finance and Constitution Committee, is absolutely right that that was a recommendation of the budget process review group. I certainly welcome that, and it is further welcome that parties around the chamber are agreed on that point. That includes the mild-mannered Bill Bowman.

Specific issues were raised on why the bill does not capture every issue that was raised through the consultation. We must be careful on tax avoidance—deliberate behaviours to avoid paying tax. In whatever we do, we engage and consult, but there was a clear reason to proceed with the bill as a focused piece of legislation to address an anomaly.

Parliament gave the introduction of the tax due attention at the time but, sometimes, there are unforeseen consequences of legislation, its interpretation and its enactment. Parliament should, of course, have the right to return to that and address it. Opposition parties have been mature enough to welcome the remedies that have been found so swiftly, consensually and constructively and I appreciate the response from the committee and stakeholders on the bill. We will return to the other matters that have been raised through the consultation.

The financial consequences have been set out. The number of people who are affected is quite small, but the issue is significant for those people, which is why we are remedying it today. I look forward to doing so in a few seconds’ time. This is only stage 1; I look forward to the further stages of the debate, and the recommendation, which has cross-party appeal, to have yet another finance debate in the Scottish Parliament following the budget debates over the course of the past few months.