Chamber and committees

Good morning. The Land and Buildings Transaction Tax (additional amount: transactions relating to second homes etc) (Scotland) Amendment Order 2022 provides for the increase in the land and buildings transaction tax additional dwelling supplement rate that was set out in the Scottish budget on 15 December 2022. The order increases the rate of the ADS from 4 per cent to 6 per cent. The change is intended to protect opportunities for first-time buyers and home movers by further helping them to compete with buy-to-let investors and second-home owners.

In addition, the change is forecast to raise much-needed revenue at a time when public finances are under significant pressure. The Scottish Fiscal Commission estimates that it will raise an additional £34 million in 2023-24.

As members will be aware, the legislation provided for the rate increase to take effect on the day after the Scottish budget statement, 16 December 2022. That near-immediate change was intended to prevent the possibility of forestalling, which would have both reduced its revenue impact in the next financial year and run counter to the policy intent. The near-immediate introduction was also intended to provide certainty for taxpayers, while acknowledging that the legislation must be approved by the Scottish Parliament in order to remain in force. As with previous rate changes, the instrument includes a transitional provision so that anyone who entered into a transaction prior to 16 December will not pay the increased rate.

I welcome the evidence that a range of organisations have submitted in response to the committee’s call for evidence, and I look forward to members’ questions.

I cannot comment on the decision that any individual landlord will take. It is also important to recognise that the ADS applies not only to the private rented sector, but to second homes and holiday homes as well. The clear policy intent behind it is to support first-time buyers and to raise much-needed revenue. As I set out in my opening remarks, the ADS will raise additional revenue; it is forecast to raise £165 million in the coming financial year, and £34 million of that is additional because of the changes that we are making.

That is the context in which we take these decisions. A broader context, too—not least, the prevailing economic conditions—will impact on the decisions that people who operate via the rented sector will take. As I have said, we take a balanced approach to our taxation policy, and a clear policy intent, which underlies the decisions that we take on the ADS, has been in place for a significant period.

That policy has been in place for a while, but I am conscious that it has been raised as an issue. That is why we have considered it as part of the review.

That might be a fair point, convener, but the reality is that stamp duty is an England-wide tax that does not have regional variations, just as LBTT is a Scotland-wide tax.

By definition, that is what the policy intends to do.

As I say, the issue came up during the ADS review and we recognise that. The word that Ross Greer used about the sector was “minuscule”, but we will be in a position to set out our response to the ADS review relatively soon.

I recognise that organisations that represent stakeholders have a primary responsibility to advocate for their stakeholders but, in setting budgets, we in Parliament and the Government have a responsibility to look at matters in the round. Although there is a clear policy intent of supporting first-time buyers, there is also a policy intent of generating revenue. We all recognise the significant challenges that public finances face currently and going forward.

I recognise that it is entirely right for organisations that represent particular sectors and groups to advocate on their behalf, but the Government has to consider things in the round and how policies will impact on all sectors and people in Scotland.

With regard to any proposals for future changes, we have been undertaking a significant review of the ADS. We will always keep our policies on tax, and more general policies, under review. I am happy to hear suggestions about any changes that should be made. I ask that those proposals be made in a way that is consistent with our framework for tax.

Ultimately, the SFC has set out its position. The changes that we have made will lead to a net increase of £34 million, once behavioural change is factored in. More broadly, looking at the revenues forecast for the coming years, a number of factors are at play—most obviously, prevailing economic conditions, as we enter an economic slowdown. We have also seen an increase in interest rates, which will naturally impact on demand for properties and, consequently, on the number of transactions that affect forecast revenue. Over the five-year horizon in the SFC’s forecast, we see revenues picking up.

The policy intent is to allow first-time buyers to compete more effectively. It is axiomatic that a home mover or a first-time buyer will not be subject to the ADS, whereas an investor or someone buying a second home, a holiday home or a buy to let property will be subject to the ADS. In terms of the tax liability, it allows for first-time buyers and home movers to compete more fairly, and it increases parity within the system. That is the policy intent.