Skip to main content

Language: English / Gàidhlig


Chamber and committees

Meeting date: Thursday, May 17, 2018

Meeting of the Parliament 17 May 2018

Agenda: General Question Time, First Minister’s Question Time, Everyone’s Business Campaign, Veterans (Health and Wellbeing), Land and Buildings Transaction Tax (Relief from Additional Amount) (Scotland) Bill: Stage 3, Point of Order, Decision Time


Land and Buildings Transaction Tax (Relief from Additional Amount) (Scotland) Bill: Stage 3

The Deputy Presiding Officer (Christine Grahame)

The next item of business is a debate on motion S5M-12264, in the name of Derek Mackay, on stage 3 of the Land and Buildings Transaction Tax (Relief from Additional Amount) (Scotland) (Bill).

As members will be aware, at this point in the proceedings, the Presiding Officer is required under the standing orders to decide whether, in his view, any provision of the bill relates to a protected subject matter—that is, whether it modifies the electoral system and franchise for Scottish Parliament elections. The Presiding Officer has decided that no provision of this bill relates to a protected subject matter and that therefore it does not require a super-majority to be passed at stage 3.

I call Derek Mackay, the Cabinet Secretary for Finance and the Constitution, to speak to and move the motion.


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

I am pleased to open this stage 3 debate on the Land and Buildings Transaction Tax (Relief from Additional Amount) (Scotland) Bill. I thank the Finance and Constitution Committee for its detailed scrutiny of the bill and the members of the Scottish Parliament who set out their views during the stage 1 debate in March. Members are now familiar with the background to the bill and its intent to give retrospective effect to amendments that were made by the Land and Buildings Transaction Tax (Additional Amount-Second Homes Main Residence Relief) (Scotland) Order 2017.

The Scottish Government’s approach to taxation is founded on, among other things, effective engagement and partnership with stakeholders. As a consequence of that engagement and a willingness to listen to the concerns of taxpayers and their representatives, we have introduced the bill. It addresses an unintended consequence in regard to the treatment of married couples, spouses and cohabitants under the additional dwelling supplement—ADS—and will deliver equity of treatment regardless of the date when joint buyers bought a home. Therefore, it is deliberately narrow in focus and scope, in that it serves only to give retrospective effect to the provisions of the 2017 order.

Members will remember that we had a notably consensual debate at stage 1 and that the Parliament has, so far, provided unanimous support for the bill. Unusually for a bill, no stage 3 amendments have been lodged in advance of the debate. Indeed, no amendments were lodged at stage 2 either. That reflects the narrow and specific scope of the bill. Therefore, I will focus my remarks on the recommendations that are set out in the Finance and Constitution Committee’s stage 1 report.

The committee’s first recommendation invited the Scottish Government to provide annual updates on the numbers of repayment claims made and the amounts repaid. I understand that Revenue Scotland has confirmed that it intends to publish figures on repayments as a result of the implementation of the bill and following the first year of its operation. That will be dependent on the information that is provided by taxpayers and agents and will be subject to Revenue Scotland’s existing policy on statistical publications.

The committee’s second recommendation was addressed principally to Revenue Scotland and invited it to consider further what steps it could take to identify taxpayers who might be eligible to claim a repayment of tax as a result of the bill. The chief executive of Revenue Scotland has written to the convener of the committee setting out that, although, as the committee noted, eligible taxpayers cannot be identified directly, Revenue Scotland has been taking, and continues to take, steps to raise awareness among taxpayers and agents using a wide range of communications activity.

The committee also invited the Scottish Government to confirm what steps it intends to take in response to the issues raised in the written evidence that were outwith the scope of the bill. A number of suggestions highlighted additional asks on the application of the additional dwelling supplement. I do not have any plans to introduce further changes to the supplement at this time, but I have noted the concerns that have been raised and will give them detailed consideration.

On the other asks, I am pleased to say that, following consideration of consultation responses, the Scottish Government today introduced legislation to Parliament to address the concerns that were raised on the application of group relief in a specific scenario and to provide for first-time buyer relief from the land and buildings transaction tax. As members might be aware, I have also launched a consultation seeking evidence to support our consideration of stakeholder asks that relate to property investment reliefs. Other issues will be considered as part of the Scottish Government’s overall approach to devolved tax management and planning.

Building on the budget process review group’s report, I am, of course, committed to working with the Parliament to consider the points that have been raised on the case for developing a new approach to technical tax legislation, such as the changes that are addressed in this bill. However, the focus of the debate is on the bill and ensuring that all the affected couples can reclaim repayment of the supplement where they have genuinely replaced their main residence. The number of affected couples might be relatively small, but I am clear that the resolution of the issue is a matter of great importance for each and every one of them.

I welcome the Parliament’s unanimous support and members’ constructive engagement on their cases and in the progress of the bill, which I am sure will continue this afternoon.

I move,

That the Parliament agrees that the Land and Buildings Transaction Tax (Relief from Additional Amount) (Scotland) Bill be passed.


Murdo Fraser (Mid Scotland and Fife) (Con)

The Scottish Conservatives warmly welcome the bill that is before us this afternoon. There are no amendments at stage 3; indeed, there were no amendments at stage 2, which I think was probably the shortest stage 2 in committee that I can remember. We are at the stage in proceedings at which there is very little new to say, and I do not intend to take up too much of the chamber’s time this afternoon rehearsing arguments that we have all heard before. I am sure that, given the sunshine, all members will welcome the opportunity to finish a little bit earlier this afternoon—not least the cabinet secretary, given that it appears that he now has an allotment to tend.

I set out in the stage 1 debate that this bill was necessary to correct an oversight in the original Land and Buildings Transaction Tax (Scotland) Act 2013. That had led to a situation in which couples were being charged an additional dwelling supplement in the scenario where only one of them had their name on a property that was being sold.

I had a case of constituents who were caught by that and who ended up with an unexpected bill of around £13,000, which they had not budgeted for. As members might expect, that caused the family a great deal of concern and distress.

I am pleased at the speed with which the Scottish Government has moved to correct that error. The bill that is before us today, which brings into retrospective effect the change already made for new transactions, is the final piece in the jigsaw in ensuring that that is done. That will come as a great relief to my constituents who were affected and others across the country who have been inadvertently caught by what was an oversight in the original legislation.

The one related issue that I would raise, to which the cabinet secretary has already referred, is group relief. That relates to a situation where land transactions occur within companies in the same group or where a share pledge or similar arrangement is in place. The cabinet secretary has already spoken on that issue. Indeed, the Scottish Government recently consulted on proposed secondary legislation to amend schedule 10 to the Land and Buildings Transactions Tax (Scotland) Act 2013 to ensure that group relief would be applied. Transactions of that nature are a normal and commonplace part of commercial dealings and share pledges are usual where bank lending occurs.

Group relief has been in place in England and Wales and there have been concerns in the Scottish business community that not having it in Scotland puts Scottish business at a competitive disadvantage when it comes to borrowing and commercial operations. If the Scottish Government is making progress on that issue, as the cabinet secretary has indicated, that is very welcome and it will correct another anomaly. The remaining issue is whether such relief would apply retrospectively to ensure that, just as in the case of the bill that is before us this afternoon, no one loses out because of an inadvertent oversight in the preparation of the original legislation. I hope that the cabinet secretary will reflect on that.

I do not think that there is any point in my detaining the chamber any longer on these issues. I am pleased to confirm that the Scottish Conservatives will support the bill and will be voting for it at decision time, which will hopefully be not many minutes from now. Like other members, I have constituents who will very much welcome the bill being on the statute book.


James Kelly (Glasgow) (Lab)

It is always a delight to take part in a consensual debate with the cabinet secretary and Mr Fraser. Scottish Labour supports the introduction and the passage of the bill, which we hope will happen shortly and which will alter the anomalies in relation to the additional dwelling supplement for land and buildings transaction tax.

The issue that has come to light is that, where there is an additional dwelling supplement, normally there is a 3 per cent surcharge. If the original property is sold within 18 months, it is subject to a relief. The anomaly that has been highlighted, principally by Mr Fraser, is that where couples are married, cohabiting or living in a civil partnership, they were not liable to claim that relief. Clearly, that is unfair and it is against the principles of taxation, which the cabinet secretary has spoken about at length at the Finance and Constitution Committee. It is right that Parliament takes steps to address that anomaly.

The proceedings were consensual as we moved through stages 1 and 2, and I am sure that that consensus will continue. The fact that there are no stage 3 amendments emphasises not just the narrow scope of the bill but the broad agreement across the Parliament on how to address the issues.

I know that the land and buildings transaction tax forum, people who are well engaged in the use of tax and other stakeholders have been unanimously supportive of the proposed change, which is very welcome.

There are two issues that we need to be aware of going forward. As the cabinet secretary has said, it is important that we raise awareness of the change, so that those people who are eligible to claim relief are able to do so and do not end up being unfairly financially penalised. I welcome the fact that Revenue Scotland is raising awareness through its forums and networks.

The other point to bear in mind is the impact that the change will have on the budget, which the financial memorandum said will be between £625,000 and £1.555 million. Although that is a small amount in relation to the large scale of the Scottish budget, it is important to monitor the situation in case the amounts vary and there are impacts on other budget lines.

Scottish Labour very much welcomes the change and the way in which Parliament and the cabinet secretary have considered and acted on the issue. We will be happy to support the change at decision time, which is no doubt fast approaching.


Patrick Harvie (Glasgow) (Green)

I, too, thank my fellow committee members and the people who have supported the committee’s work in scrutinising the bill. What a rare treat it is to see the output of a matter that has been considered by the Finance and Constitution Committee not giving rise to immense acrimonious ideological disagreement on points of constitution or taxation policy.

As others have said, the bill is a relatively minor and straightforward correction of an aspect of how the LBTT operates, so I am sure that everyone will vote in support of the bill.

The cabinet secretary knows that the Greens are not the world’s greatest fans of the LBTT. It is a modest improvement on what went before, but it captures only a tiny proportion of the unearned asset wealth that is stored up in housing after significant increases in property values. We consider that a modern, progressive, reformed and up-to-date property tax needs to play an important part of our overall tax policy. The LBTT applies only to transactions, so it does not achieve that. As I have said, it is a small step forward from what went before, but it does not resolve the on-going need to look at property taxation more widely.

Secondly, the important recognition that couples should be treated equally, regardless of marriage, civil partnership or cohabitation status, is an important signal that we respect the equality of all families, but that has not been achieved in relation to, for example, what Westminster calls the married couple’s allowance. It is important that all families be treated equally in that regard.

Finally, I draw attention, as I think others will do in the future, to the evidence that we heard from the Chartered Institute of Taxation and others, which suggests that it is not unusual or uncommon for taxation measures to give rise to unintended consequences. That is an additional argument for a future finance bill being part of the way in which we undertake our work—a finance bill could embody significant matters of policy on taxation, as well as correcting previous unintended consequences or making minor adjustments that are needed. I hope that the minister remains open to considering that, as the way forward.

The Presiding Officer (Ken Macintosh)

We move to the open debate. Ivan McKee will be followed by Neil Bibby.


Ivan McKee (Glasgow Provan) (SNP)

I am pleased to speak in this stage 3 debate on the Land and Buildings Transaction Tax (Relief from Additional Amount) (Scotland) Bill. I take the opportunity to draw members’ attention to my register of interests, with respect to residential property rental.

The change to the LBTT that we are debating is a small but important change, because it will enable people who, through no fault of their own, have been unfairly penalised through having to pay an additional amount, to redress that situation. It provides for the situation in which a couple who have two houses to sell and who are purchasing a single property could be treated as a single economic unit for the purposes of the additional dwelling supplement for both the sale and the purchase transactions. It is right that that anomaly be corrected, and that steps are now being put in place to ensure that the correction will apply retrospectively. It is good to see consensus across the chamber on that point.

Some other potential anomalies have been identified in the LBTT legislation; I know that the Law Society of Scotland and others have highlighted additional concerns to be considered and, if necessary, addressed. Although the bill has a narrow focus on the additional dwelling relief, I know that other aspects of the LBTT will be considered in due course. I look forward to considering them when they come up for debate in committee and in the chamber.

It is worth taking a minute, at this stage, to review the wider context of the Scottish Government’s changes to the LBTT and their impact. The steps that have been taken by the Scottish Government to focus the LBTT on the people who can most afford to pay and, as a consequence, to lower tax relative to the rest of the United Kingdom for people at the lower end of the housing scale, are to be welcomed. The measures have resulted in an additional 23,000 home purchasers having no LBTT to pay, and have meant that 93 per cent of house purchasers in Scotland either pay no LBTT or pay less than they would have under stamp duty land tax. That is good not only for individuals and families who benefit as a result; it is also good for the economy because it makes it easier for people to get on the housing ladder, and it helps the housing market at the lower end and enables a more mobile workforce, as a consequence.

I know that there was some concern that the measures could have a detrimental effect on the property market at the higher end, so it is worth taking a minute to review the data to determine whether that has been the case. The latest data from Revenue Scotland show that transactions in the £325,000 to £750,000 band, which represents the top 7 per cent of the market, have grown by 20 per cent and that revenues in the band have grown by 23 per cent over the past year. At the very highest segment, sales above £750,000, which represent the top 0.5 per cent of the market, have been growing even more strongly, with a 31 per cent increase in annual transactions being recorded. That suggests that the strength of the market in those bands has not been impacted by the Government’s restructuring of the LBTT.

I am very glad to see the specific point in respect of the additional dwelling supplement being addressed in the bill, and will be glad to see the bill being passed by Parliament.


Neil Bibby (West Scotland) (Lab)

Like my Labour colleague James Kelly, the minister and other members across the chamber, I make clear my support for the bill that we will vote on today. I welcome the fact that the minister and the Government have listened to and have, by introducing the changes in the bill, acted to address concerns that were raised by Murdo Fraser and others. As I have said before, it is unusual to introduce and pass retrospective legislation, but in this case it is absolutely the right thing to do, because the bill will correct unintended unfairness.

As other members have said, the additional dwelling supplement was introduced to raise taxation revenue from people who were buying additional properties as an investment opportunity or as holiday homes. Taxing people who are just replacing their main home was not intended and goes against the principle of fair taxation, as James Kelly said. At the time, the Scottish Government’s intention was clear: it wanted to levy an additional tax on people who purchased a property who already own another property. Rightly, the Scottish Government recognised that a situation can often arise in 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. However, as 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 unintended consequence to which I previously referred has been created.

I echo what other members have said today and previously: if Parliament decides that retrospective legislation is needed to address that unfairness, it would be pointless if the intended beneficiaries of that legislative change were unaware of their entitlement to claim a refund. I therefore reiterate that measures need to be taken to ensure that people are aware of the moneys to which they might be entitled.

Everyone accepts that the easiest way to address such anomalies is secondary legislation. Unfortunately, as we know, 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.

Although the bill is unusual, it is straightforward, it has unanimous support and it will address a small but significant unfairness. I will therefore join other members in supporting the bill at decision time.


John Mason (Glasgow Shettleston) (SNP)

Having been on the previous Finance Committee when we spent many happy hours considering and then legislating on the land and buildings transaction tax, I continue to have a fair degree of affection for LBTT, so I appreciate the opportunity to take part today and renew its acquaintance.

LBTT was the first devolved tax that we legislated on in the Parliament so, just like the eldest child in a family has a special place in its parents’ affections, I think that, for some of us, LBTT has a special place in our affections.

LBTT may not be the best-known tax that we have, and it may not produce the most money—it tends to be outshone by its bigger sibling, income tax—but it is a fully devolved tax that we were able to fashion in more of a Scottish way of doing things, and John Swinney deserves many congratulations for his role in leading on it.

No legislation is perfect, as has been said, and, in any case, circumstances change. I fully support the principle that we should revisit and review legislation and seek to improve on it when that is required, so I am more than happy to support this amending bill. It seeks to correct what is widely agreed to have been an unfairness that was not spotted at the earlier stages of our consideration of the tax.

I do not think that, as a Parliament, we need to be worried about that. We debate and legislate based on what we know at the time, and we then build on that as we move forward. That raises the question, however, of how we amend tax legislation on a regular and on-going basis. I am attracted to the suggestion made by the Law Society of Scotland—and, I think others—that we should consider a regular finance bill for, as the Law Society describes it,

“necessary changes ... at the administrative end of policy”.

That might not need to be annual, but it could perhaps be every two or three years. Something like that appears to happen with the Treasury and HM Revenue and Customs in the UK, and that is something that we could perhaps adapt for our purposes. I understand that the Government and the Finance and Constitution Committee will look into that, and it certainly sounds like a possibility to me.

I take the point that the forthcoming change to legislation needs to be publicised, so that those who could benefit from it are aware of it. However, we clearly need to be aware that we are probably looking at only between 76 and 189 cases, so I do not think that a widespread advertising campaign on television is needed.

In whatever way we look at it, LBTT has been an improvement on SDLT. It has been more progressive and fair from the beginning. The first-time buyers relief of £175,000 is very generous in my opinion. I accept that house prices vary a lot around Scotland, but people can certainly buy a reasonable flat in my constituency for less than half of that amount.

I hope that we can all support the bill at stage 3. It appears to be one of the less contentious bills that we have dealt with in this place, and I look forward to voting for it at decision time.

The Presiding Officer

We now move to the closing speeches.


Patrick Harvie

Well, it has been a short time, Presiding Officer. This has been a short debate, and I do not think that I have ever given an opening speech and a closing speech in a debate within so short a time.

I have learned something in this brief debate that I never expected to hear: that someone has a sense of affection for LBTT. It is a curious choice of instrument on which to place a feeling of affection.

As I have said before, I regard LBTT as a small step in a more progressive direction but one that fails adequately to address how a genuinely progressive tax policy would deal with the unearned wealth that is locked up in our housing market. I again make the case for a more progressive approach to property taxation in future.

I will draw out a little more the arguments in the stage 1 report on the bill that the Finance and Constitution Committee made regarding a potential finance bill. In its submission to the committee, the Institute of Chartered Accountants of Scotland said:

“the existing limited annual tax procedure to vote on income tax rates and bands is not enough. To maintain and improve the Scottish devolved taxes a regular, formal, tax process is needed.”

As John Mason has reminded us, this tax measure is a relatively recent introduction. We have seen a gradual increase in the range and scope of tax powers that are within devolved competence. However, with the limited range of instruments that are available to us, we are clearly not serving the interests of scrutiny properly and we are perhaps not giving the Government the ability to implement policy as coherently as it would wish to. I am pleased that the committee will look further at the idea of a finance bill that would offer the chance of a more coherent approach both to the large tax policy decisions and to getting the small details right. Like everybody else, I will vote for the bill tonight.


James Kelly

The debate has been very short, so I will make a brief speech to sum it up. I echo what Patrick Harvie said, in that in all the Finance and Constitution Committee debates that we have had recently, such as those on the budget and the European Union (Withdrawal) Bill, there has been a lot of disagreement and they have been hotly contested, so it is good to participate in one on which there has been unanimous agreement across the chamber.

I welcome what the cabinet secretary said in relation to the annual updates that will be produced. When any legislation is introduced, it is important to monitor its effectiveness. As Neil Bibby said, it is important that people who will become eligible to claim relief as a result of this change going through are able to do so. We do not want to see people falling through the net, so annual updates will allow us to see the effect of that and to make sure that the awareness raising that Revenue Scotland will carry out will be effective.

I know that there has been comment from the Chartered Institute of Taxation about group relief for situations in which companies are involved in land transaction deals between themselves. There is clearly some anxiety about the group relief proposals that the Government is introducing not being applied retrospectively. The committee and Scottish Labour will look at that in detail once we have seen the proposals, and we will engage with the Chartered Institute of Taxation and others.

I agree with the comments made by Patrick Harvie and others about an annual tax bill. As the Parliament moves to a regime in which we have more tax-raising powers, we will get into a situation in which there will be a requirement to amend technical detail on taxation. It would make sense for appropriate changes to be dealt with in a sweeping-up finance bill at the end of each year.

To sum up, I welcome the consensual debate that has taken place. This is an example of a situation in which an anomaly has been identified and both Parliament and the Government have acted quickly to address it. Scottish Labour will support the bill at decision time, which will come up shortly.


Derek Mackay

Like every other member who has spoken in the debate, in summing it up I will be relatively brief.

Mr Fraser gave us a revelation that I think surprised even Mr Harvie. I was not surprised by John Mason’s comment that he has affection for this kind of tax, because he is a both a lawmaker and a former accountant. I am more surprised that Murdo Fraser thinks that I have an allotment hidden away somewhere in Scotland. Look, I was just helping someone out at the weekend; it was not mine—that would be my offering to him. However, I did think that, if I had one and I had been tending to it in such wonderful weather, I might have ingratiated myself with the Greens. [Interruption.] Presiding Officer, I think that I might have broken the harmony that there has been in the chamber in relation to LBTT. I stress that I was happy to introduce the previous legislation in that regard.

It is important that, when the Government has identified an unintended consequence in tax law as a result of stakeholder engagement and fair member representation, we are willing to address it in a consensual and constructive fashion. All of Parliament is responsible for the laws that we generate, of course, but we have identified an issue and have been able to resolve it in a constructive fashion. In fairness, we did so as quickly as we could—James Kelly reflected on that. We should engage, consult, go through due legislative process and remedy the issue.

All members have picked up on the fact that there is an issue around how we can accommodate matters going forward. The prospect of an annual finance bill is worthy of further exploration.

Patrick Harvie touched on issues that are wider than the bill but, like all members, he welcomed its fundamentals.

All members have spoken helpfully about the nature of LBTT, the additional dwelling supplement and the remedy.

I want to go back to the group relief issue, which James Kelly and Murdo Fraser raised. The legislation will be helpful, and it will take effect very quickly. I know that there is the issue around the retrospective element. I believe that I can remedy that, as well, if I am given the time to ensure that I get it right. That will take away the concerns that exist with regard to group relief.

The bill addresses an anomaly that is maybe not of substantial budget significance, but it is a significant matter for those affected. I appreciate the way in which all members have engaged in the legislative issue and how they have conducted themselves in raising specific cases.

Following the successful passing of the bill, all of us, including stakeholders and Revenue Scotland, have a duty to raise awareness with appropriate cases so that people can be recompensed where that is appropriate and where they are eligible.

I am happy to conclude my remarks with that. I re-emphasise the consensus with which the bill has progressed and the retrospective action that will flow from it to ensure that we address the issue in the fashion that was requested of us.

The Presiding Officer

That concludes the stage 3 debate on the Land and Buildings Transaction Tax (Relief from Additional Amount) (Scotland) Bill.

Given that decision time today is at 4 o’clock, I am minded to accept a motion without notice to bring forward decision time to now.

Motion moved,

That, under Rule 11.2.4 of Standing Orders, Decision Time on Thursday 17 May be taken at 3.32 pm.—[Joe FitzPatrick.]

Motion agreed to.