Land and Buildings Transaction Tax (Addition and Modification of Reliefs) (Scotland) Order 2014 [Draft]
Our next item of business is to take evidence from the Cabinet Secretary for Finance, Constitution and Economy on a piece of subordinate legislation. The cabinet secretary is joined for this item by David Kerrouchi, Neil Ferguson and John St Clair from the Scottish Government.
I invite the cabinet secretary to make an opening statement explaining the draft order, and remind him not to move the motion at this point.
Thank you, convener.
United Kingdom stamp duty land tax legislation includes a number of miscellaneous reliefs that apply only in relation to specific organisations or types of property. The purpose of the draft order is to include in our land and buildings transaction tax legislation similar miscellaneous reliefs, using the power in section 27(3)(a) of the Land and Buildings Transaction Tax (Scotland) Act 2013.
There are five reliefs. The first is friendly societies relief, which provides relief from LBTT where two or more registered friendly societies amalgamate. The second is building societies relief, which provides relief where two or more building societies amalgamate. The third is visiting forces and international military headquarters relief, which provides relief for land transactions involving the building or enlarging of barracks or camps for a visiting force, to facilitate the training of a visiting force or to promote the health or efficiency of a visiting force.
The fourth is relief for property that is accepted in satisfaction of tax. Under section 11A of the National Heritage Act 1980, which extends to England, Scotland, Wales and Northern Ireland, a land transaction that is entered into by any museum, art gallery, library or other similar institution is relieved from SDLT where property is offered to HM Revenue and Customs by a taxpayer in respect of tax. The property may be transferred to one of a range of heritage bodies. Some Government-sponsored cultural and heritage bodies in Scotland have powers to acquire land or buildings. That includes acquiring as acceptances in lieu, and usually requires the specific agreement of ministers.
If LBTT was to be incurred by cultural and heritage bodies in such cases, any acceptance of land or buildings in lieu would result in a liability on the part of the accepting body to pay LBTT on the acquisition. That would, in effect, be a charge on the public purse. The relief from LBTT, which is an equivalent provision to that which is currently in place for SDLT, has therefore been added to avoid that outcome.
The fifth relief is lighthouses relief. Under section 221 of the Merchant Shipping Act 1995, which extends to England, Scotland, Wales and Northern Ireland, a land transaction is relieved from SDLT if it is entered into by, or under the direction of, the general lighthouse authorities—including the commissioners of northern lighthouses, who oversee the lighthouse infrastructure in Scotland—for the purpose of carrying on services that are funded through the general lighthouse fund.
The Northern Lighthouse Board has confirmed that, given the widely distributed network of lighthouses and the need for regular changes to reflect changes in shipping traffic to ensure the continued safety of navigation, it has a regular number of land transactions and that the position will continue in the future. On rare occasions, the board may be directed by the secretary of state to undertake activity that may require such transactions. The relief from LBTT has therefore been included to deal with such circumstances.
Finally, the draft order also makes two amendments to existing reliefs under the 2013 act. First, to support crofting in Scotland, it provides for full relief from LBTT for transactions involving the crofting community right to buy under which two or more crofts are bought, rather than the partial effect that is available under SDLT. Secondly, the draft order also makes a minor but crucial amendment to the relief for certain acquisitions by registered social landlords to ensure that if any one of the conditions is satisfied, the relief is available.
Thank you very much for that opening statement. I have no questions. Do colleagues have any?
I seek clarification on the crofting community right to buy. Is the cabinet secretary saying that a person would get only partial relief for one property but full relief for more than one property? Is that different from the position under SDLT? If that is the case, why has it been decided to give full relief for multiple purchases?
It is full relief, and the justification for that is essentially to remove an obstacle that may influence people’s judgment as to whether to exercise the right to buy; it will also assist that process.
Okay.
I just want clarification on the relief for visiting forces and international military headquarters. Can you give an example of circumstances in which a European Union member state’s army might buy land in Scotland?
The only circumstance that I can conceive of that might arise is where a military exercise was planned to be taken forward over a sustained period of time.
Thanks.
There are no further questions from members, so we move to the debate on the motion. I invite the cabinet secretary to move motion S4M-12186.
Motion moved,
That the Finance Committee recommends that the Land and Buildings Transaction Tax (Addition and Modification of Reliefs) (Scotland) Order 2014 [draft] be approved.—[John Swinney.]
Motion agreed to.
The committee will now publish a short report for the Parliament setting out our decision on the draft order.
Land and Buildings Transaction Tax (Administration) (Scotland) Regulations 2014 (SSI 2014/375)
Land and Buildings Transaction Tax (Ancillary Provision) (Scotland) Order 2014 (SSI 2014/376)
Land and Buildings Transaction Tax (Transitional Provisions) (Scotland) Order 2014 (SSI 2014/377)
Scottish Landfill Tax (Administration) Regulations 2015 (SSI 2015/3)
Our next item of business is to take evidence from the cabinet secretary on three pieces of subordinate legislation relating to land and buildings transaction tax and one concerning landfill tax. I invite the cabinet secretary to make an opening statement.
Thank you, convener. I will explain in turn the purpose of each of the three instruments on land and buildings transaction tax, which are subject to the negative procedure.
The main purpose of the Land and Buildings Transaction Tax (Administration) (Scotland) Regulations 2014 is to allow taxpayers who are unable to quantify their LBTT liability when the price that they are paying is either uncertain or dependent on a contingency to apply to defer the payment of tax in the same situations in which they would currently apply for deferment from United Kingdom stamp duty land tax.
The regulations set out the framework for such applications and include the decision-making process that Revenue Scotland must adhere to; the grounds for refusing an application to defer a tax payment; and the arrangements for making tax returns and payments. The regulations also prescribe the evidence that must be provided to Revenue Scotland for the purposes of relief for alternative finance investment bonds.
On the Land and Buildings Transaction Tax (Ancillary Provision) (Scotland) Order 2014, to ensure prompt payment and deliver administrative efficiencies, the Land and Buildings Transaction Tax (Scotland) Act 2013 requires agents to make a return and pay any tax due before any application to the Registers of Scotland in respect of the land register or books of council and session can be accepted.
Section 43 of the 2013 act creates a link between land registration and payment of LBTT by providing that documents effecting or evidencing a land transaction may not be registered unless a land transaction return has been made and any LBTT due has been paid. That rule has relevance in relation to registers managed and controlled by the keeper of the registers of Scotland, including the books of council and session, which is a court register.
The ancillary provision order introduces a mandatory requirement to submit the appropriate application form when applying to register in the books of council and session any deed that implements a notifiable transaction. That will enable the keeper to fulfil the duty in section 43(1) of the 2013 act not to accept an application to register documents in the books of council and session until a tax return and payment have been made.
As for the Land and Buildings Transaction Tax (Transitional Provisions) (Scotland) Order 2014, when LBTT becomes chargeable, the commencement date will be set in a commencement order made by Scottish ministers under section 70(2) of the 2013 act. SDLT will be disapplied in Scotland on a date to be appointed by the Treasury under section 29(4) of the Scotland Act 2012. The order defines the commencement date for LBTT as the day after the date appointed by Treasury order under section 29(4) of the 2012 act.
Section 29(5) of the 2012 act makes provision for certain land transactions to which SDLT will continue to apply, namely a land transaction for which the contract was entered into or was substantially performed prior to the Scotland Act 2012 receiving royal assent on 1 May 2012. Section 29(6) of the 2012 act makes provision for certain land transactions to which SDLT will no longer apply—for instance, where there has been an assignation or sub-sale in a contract that was entered into prior to 1 May 2012. The purpose of the order is to make provision for certain transactions that began under SDLT but which have an effective date on or after the commencement of LBTT. The intention is to ensure, first, that during the transitional period in which SDLT is disapplied in Scotland and LBTT is introduced, such transactions are not taxed twice under SDLT and LBTT but are subject to one of them; and, secondly, that if the outcome of the provisions in the 2012 act is that no tax would be payable, tax is payable under LBTT if it would have been payable under SDLT. The order makes provision to achieve those intentions for 13 different types of land transactions or arrangements involving land transactions.
Thank you very much, cabinet secretary. Do colleagues have any questions?
In the consultation, three respondents asked whether guidance would be issued to address a perceived lack of detail regarding the information to be provided in a deferment application, and the policy note confirms that Revenue Scotland will publish such guidance in due course. How long will it be until that is made publicly available?
It will be made available on 16 February.
Thank you.
As that has exhausted members’ questions, I thank our witnesses and call a one-minute suspension to allow them to leave.
I think that we still have to do the landfill tax regulations, convener.
You are absolutely right. I am afraid that there is a mistake in my briefing, which says that you leave at this point and that we consider the matter after you have done so. My assumption was that you were going to leave now.
My apologies, cabinet secretary. Could you speak to the landfill tax regulations?
Thank you, convener.
The Scottish Landfill Tax (Administration) Regulations 2014, which use powers from the Landfill Tax (Scotland) Act 2014 and the Revenue Scotland and Tax Powers Act 2014 in respect of a number of provisions relating to registration, accounting, credits, the Scottish landfill communities fund and rules for the weighing of waste, formed a significant part of the Scottish Government’s consultation paper on secondary legislation for the Scottish landfill tax, which was published in May 2014. We also received feedback on the proposals from a number of consultation events that were held over the course of the year.
Landfill operators will be able to register with Revenue Scotland from 16 February 2015, and must do so within 30 days of their intention to carry out landfill activities. The regulations also make provision to allow a landfill operator to correct any inaccuracy or make changes to their details. A landfill operator’s first accounting period begins on the day they become registered, and tax returns should be submitted along with any payment of tax no later than 44 days after the end of each accounting period. We have increased that period from 30 days in recognition of points that were raised in the consultation process and the fact that aligning the tax accounting period with environmental reporting period returns could result in transitional cash flow issues for some operators.
The regulations also provide for a tax credit system, in so far as a person who has paid or is liable to pay tax may be entitled to credit, providing that prescribed conditions are fulfilled. The credit provisions cover three areas: bad debts; removing material for reuse and recycling; and the Scottish landfill communities fund, which is the area that I will focus on.
09:45The Scottish landfill communities fund provides funding for community or environmental projects in recognition of the disamenity experienced in the vicinity of landfill sites. I have already made Parliament aware of my intention to introduce a proposed enhancement of the tax credit arrangements under which the fund will operate. As we landfill less, it is inevitable that less money will be available to the fund in the coming years, and increases in the credit cap will not offset the expected decline in tax revenues caused by the decline in the amount of material going to landfill. I have therefore ensured that the regulatory approach is appropriate, while capping administration costs at a maximum of 10 per cent to ensure that as large a proportion of the contributions as possible goes to project expenditure.
A matter of much debate is the 10-mile radius rule that is applied to the UK fund. I believe that the communities that are most affected by landfill should benefit most from the fund, but I also recognise that under current arrangements those suffering from the effects of transportation and transfer of waste going to landfill are ineligible unless they live near a landfill site. As a result, the regulations provide that projects near a transfer station will be eligible to apply to the fund.
The fund’s objectives are set out in the regulations. During the consultation, a significant number of stakeholders observed that waste prevention was a logical addition to the community reuse and recycling objective, and there was also support for including sites of archaeological interest in the objective to allow funds to be spent on historic buildings, provided that the sites were accessible to the public and were within the vicinity of a landfill site. Those proposals have been incorporated into the list of objectives for the fund. A contribution made by a landfill operator and any income that is derived must be spent on an approved objective of the fund within two years of the original contribution being made, and work is continuing with stakeholders, the Scottish Environment Protection Agency and Entrust, which is the other regulator of the United Kingdom fund, to ensure that processes are in place to establish the Scottish landfill communities fund.
Finally, in the consultation, we proposed changing the way in which waste is weighed when entering a landfill site, for the purposes of determining tax. Under the existing UK system, a landfill operator can apply to discount the water content of waste in certain circumstances, such as where water has been used to damp down waste to reduce dust. The proposal in our consultation was to exclude such water discount provisions in the Scottish landfill tax. The main reason for that proposal was that the arrangements can be quite complex and can allow for tax evasion; moreover, liquid wastes are banned from landfill. Stakeholders expressed concerns about health and safety and waste tourism, and said that the measure would put Scottish business at a competitive disadvantage. In light of those arguments, I have introduced provisions to discount the tax due on non-naturally occurring water from waste deposits, along the lines of the UK discount.
Thank you very much, cabinet secretary. Do colleagues have any questions?
Just one, convener. The cabinet secretary mentioned the discussions that are going on about the establishment of the Scottish landfill communities fund, which, at present, is administered on a UK-wide basis by Entrust. When does the cabinet secretary expect the Scottish fund to take effect? Obviously, a number of organisations that derive funding through the fund are waiting to see the successor arrangements that the Scottish Government envisages.
I would want it to be in place for 1 April.
Thank you very much, cabinet secretary. We will have a one-minute break to allow our witnesses to leave, after which we will consider the negative instruments.
09:48 Meeting suspended.
Our next item of business is to consider the negative instruments on which we have just heard evidence. Do members have any comments on them? It seems that members have no comments.