LBTT forecasting model not fit for purpose, report concludes

An independent report for the Scottish Government has described as "ill-suited" its revenue forecasting model for land and buildings transaction tax, the Scotsman reports today.

The review, by London-based Alma Economics, concludes that current methodology is not robust enough to make proper predictions for how much revenue will be raised.

When the tax was introduced in April 2016, rates were set so that most house purchases would incur less tax than under the previous stamp duty system, but sharply rising rates meant that more expensive houses would incur much higher tax charges, with the breakeven point coming at around £330,000.

The market for higher value properties is said to have suffered as a result, with owners being more reluctant to put their properties up for sale.

The manner of charging the additional dwelling supplement has also resulted in sellers paying an extra charge if they buy another property before their sale is completed, and having to reclaim it later.

Earlier this year, it was revealed the LBTT scheme would generate £800m less than originally thought.

Paul Hilton, chief executive of the Edinburgh Solicitors’ Property Centre, commented: “Despite the market being in favour of the seller, anecdotal feedback from solicitor estate agents on behalf of their sellers indicates the introduction of LBTT, and the additional dwelling supplement in April 2016, are proving to be discouraging to sellers.”