A number of property experts have called for an extensive review into the new Land and Buildings Transaction Tax (LBTT) after it was revealed that stamp duty could be down by more than £30 million in the last year.
The stamp duty replacement that was introduced in April this year could be damaging the property market according to some experts with others calling for the system to be changed once more.
Under LBTT, a rate of 5% is levied on the proportion of a property's price between £250,000 and £325,000, with a 10% rate applying between £325,000 and £750,000 and 12% above £750,000. Effectively there has been a tax cut on sales under £325,000, but an increase above that sum.
LBTT Forecast “Less than Expected.”
Some experts brought up their concerns to MSPs at a consultation in Holyrood with the Scottish Fiscal Committee submitting a paper to the finance committee. The paper submitted Scottish Fiscal Commission estimated that revenues under the new tax system were between £203.9m to £243.9m. The paper took into account the effect of forestalling, which involves people bringing transactions forward to avoid the new tax.
The report contradicts the Scottish government's forecast for LBTT revenues which they estimated to bring in £235m for 2015-16. However, this report from the Scottish Government did not include forestalling.
Following the new figures, the Scottish Property Federation (SPF) have called for the 5% tax rate to be raised with the 12% rate to be abolished in its entirety. According to the SPF, there has been a 22.5% decline in sales of properties over £400,000 with a 54% reduction in sales of homes costing more than £1m between May to September 2014 and the same period in 2015. The organisation also claimed that international buyers of property were down by 9% in the last year as a result of the new transaction tax.
Chairman of the organisation Chris Stewart told the committee: "This is not about feeling sorry for people in that part of the market, it's about allowing the market to function properly.
"Clearly the tax structure, that 12%, is putting people off. It's stopping people from investing in Scotland."
Philip Hogg, chief executive of Homes for Scotland also said that the tax was causing issues for the market saying: "The impact of the tax at the top tier levels, the ones where the higher tax bands come in, has been quite significant, and we're hearing anecdotally a number of our members stating that sales have either been stalled or have not gone through."
Despite some of the criticism regarding the decline in the number of high-end properties, research indicates that the number of first-time buyers has increased by 8,500 in the last year with some experts and MSPs stating that less stamp duty may be a catalyst for the rise in the number of first-time buyers.
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