Finance and Constitution Committee

Meeting date: Wednesday, February 7, 2018

Official Report 551KB pdf

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

The final piece of business on our agenda today is evidence on the Land and Buildings Transaction Tax (Relief from Additional Amount) (Scotland) Bill at stage 1 from Derek Mackay, the Cabinet Secretary for Finance and the Constitution. The cabinet secretary is joined by officials: Ewan Cameron-Nielsen, from the finance directorate, and John St Clair, the senior principal legal officer in the Scottish Government. Members have copies of all the written evidence that has been received, along with a SPICe briefing. Before we go to questions, I invite the cabinet secretary to make an opening statement.

Thank you, convener. The bill aims to give retrospective effect to an order that was considered by the committee in June 2017. That order and the bill consider the treatment of economic units—the term that is given to married couples, civil partners and cohabitants, and those who are living as if they are a married couple under the Land and Buildings Transaction Tax (Amendment) (Scotland) Act 2016. In 2016, the additional dwelling supplement—a 3 per cent additional rate of tax—was introduced. That supplement applies when, on the effective date of a transaction, a buyer owns more than one dwelling and they are not replacing a main residence. In the context of the legislation, replacing a main residence means selling the previous main residence and buying a new main residence.

It is the Scottish Government’s intention that, when the additional dwelling supplement is paid, 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. As ADS has been in operation, it has become clear that, in practice, the legislation has not worked as it was intended to in relation to economic units and the ability to reclaim the tax that is paid after a former main residence has been sold. That has been corrected for all transactions occurring after the order came into force, in June 2017.

Members of this committee and stakeholders highlighted a desire to secure retrospectivity for the relief in respect of the qualifying couples. The Scottish Government agrees with that view and has, therefore, brought forward primary legislation for your consideration to enable the relief to apply retrospectively. That will mean that qualifying buyers will be able to reclaim a payment of ADS when they have had to pay the additional amount despite having disposed of the previous main residence in the 18 months prior to the effective date or when they would not otherwise be able to reclaim the additional amount, having disposed of their previous main residence in the 18 months after the effective date.

I look forward to hearing the committee’s views on the matter.

Thank you, cabinet secretary. Ivan McKee has a question about groups.

Cabinet secretary, you will have seen that, in some of the submissions that we have received, there are comments from the Law Society of Scotland and others about other changes that they want to see to the LBTT regime. There are also some comments on the process whereby Revenue Scotland and the Government interacted and were involved in reviewing and making changes as required. I do not know whether you have had a chance to look at those submissions. Do you have any comments to make on any of those areas?

I am aware of some of those issues, but I want to be clear that the scope of the bill is really tight—it just gives effect to what we know we need to fix. The scope is tight, the purpose is clear and that is what I want to achieve.

Other people have engaged in other matters relating to LBTT, and there are wider issues. It would be nice to have a finance bill like the one at Westminster that is able to do a lot of tidying up when there might be unintended consequences and anomalies or when refinement might be required. That would be a great place for such issues to be addressed in the future. However, issues such as the group shares issue and other matters are not part of this bill. I think I have a remedy that would help with that specific issue, but I will write to the committee before I announce anything—I will not prejudice or preview that now.

There are other matters that are not relevant to the purpose of this piece of legislation but that I will reconsider in the light of the engagement that we have had over the last wee while.

Thanks very much.

I remind members of my interest as a member of the Law Society of Scotland.

Before I ask my question, I thank the cabinet secretary for bringing the bill forward. He will recall that I wrote to him on the issue some time ago, raising a matter that involved constituents of mine who were caught by this particular loophole. I am delighted that the cabinet secretary has acted on that.

It is terrifying what we can do when we work together.

Isn’t it marvellous? We should do more of it, cabinet secretary.

Hear, hear.

My question relates to a comment that was made by the Law Society in the evidence it has submitted to the committee. The society welcomes the bill as it is drafted, but it makes the point—which I think is quite an important one—that the measure will require to be given wide publicity once the bill is enacted to ensure that the taxpayers who have been caught out are aware of the change in the law and that, if they have paid ADS, they are able to reclaim that. How does the Scottish Government propose to publicise the legislation, assuming that Parliament passes it?

I am not sure that a mass publicity campaign would be the most proportionate, effective or targeted intervention, whereas Revenue Scotland will have a very clear function. It has been aware of our desire to remedy the situation, so I think that we will engage with Revenue Scotland and see how it approaches it.

I am happy to have Revenue Scotland engage with the committee—it is not for me to do so—if the legislation is successfully passed, explaining how it will contact people who are entitled to reclaim the money. I am sure that constituency members will also get back positively to cases that have been raised.

We have estimates of the cost and of how many people the bill should affect—that is all in the financial memorandum. It is a fair point that we must try to identify them. In any event, the legal world will be well aware of the bill and will raise publicity, but it is a good question for Revenue Scotland.

I think that Ivan McKee still has a quick question.

Just for the sake of completeness, I wanted to refer on the record to my entry in the register of members’ interests with respect to residential property.

No other committee member has identified that they wish to ask a question at this stage. Thank you, cabinet secretary. The clerks will now produce a report for the stage 1 process.

Meeting closed at 11:49.