North-east property expert calls for LBTT tax holiday to avoid Brexit slump

A leading property lawyer has called on the Scottish Government to consider a “tax holiday” for home buyers to combat a post-Brexit sales slump.

Rodney Whyte, a specialist in land acquisition and housebuilding, claims lowering the higher bands of Lands and Building Transaction Tax (LBTT) would create a market stimulus and help smooth Brexit jitters.

The Scottish Government last year collected £546m in LBBT which is paid on all domestic property transaction valued at more than £145,000.

Mr Whyte, a partner in law firm Pinsent Masons in Aberdeen, said: “As we edge daily towards the prospect of a Brexit-no-deal scenario, serious questions arise as to whether this level of tax revenue is sustainable

“It may be prudent for the Scottish Government to now consider options to maintain and stimulate transactional activity so as to ensure that LBTT revenues continue to make a substantial contribution to Scotland’s finances.”

Mr Whyte said market soundings indicated there were fewer people making reservations on new homes and the most logical explanation for this appears to be Brexit.

There was also a wider acknowledgement that Scotland’s LBTT structure, especially at the higher end of the market, was uncompetitive and more punitive compared to the equivalent Stamp Duty paid in England..

For example, buying a property in Scotland in the £325,000-£750,000 price bracket will attract LBTT of 10 per cent and any property over £750,000 a hefty 12 per cent of value. In England, the Stamp Duty equivalent on a property valued between £250,000 and £925,000 is only five per cent, doubling to 10 per cent for purchases between £925,000 and £1.5m, and capped at 12 per cent on any home valued at more than £1.5m.

Mr Whyte added: “The higher tax rates in Scotland are not helpful in encouraging people to buy in Scotland and there is little doubt they act as a disincentive to inward investment. Now may be the time for the Scottish Government to soften their stance regarding the higher rate bands and to offer a Brexit-related LBTT holiday covering the period leading up to and post-Brexit.

“A relaxation on LBTT and a re-adjustment of rate bands would create a stimulus, particularly at the upper end of the market which generates a disproportionate slice of LBTT revenue. It would also create a degree of equal comparison with the English market and at least we would not be at a disadvantage compared to our southern neighbours.”

Such a “holiday” could be for a defined period which encourages continued transactional activity during a time of significant uncertainty, and if tax revenue numbers were not adversely affected the Government might choose to elongate the policy and level the playing field with England.

Only last month Bank of England governor, Mark Carney, predicted a disorderly exit from the EU could have a crushing effect on house prices, which he forecast could fall as much as 35 per cent over a three year period.

He added: “Cautious house buyers may be tempted to wait to see if this comes to pass and cash in at the bottom of the market, but such a hiatus would be disastrous on many fronts. A defined LBTT relaxation period would send a strong message that now is a good time to buy and would help sustain transaction levels and tax revenues in the uncertain months ahead.

“The Scottish Government have been innovative in helping aspiring home owners take their first steps on to the property ladder. Now is the time to continue to be bold, to continue to innovate and demonstrate forward thinking, so that transaction levels, and as such LBTT receipts at the higher end of the housing market, are maintained despite the gathering clouds of Brexit.”