LBTT supplement bill passes final Holyrood stage

The bill providing for a 3% supplement on the land and buildings transaction tax payable on a purchase of a second or subsequent home was passed yesterday by the Scottish Parliament.

MSPs approved the Land and Buildings Transaction Tax (Amendment) (Scotland) Bill without a division, after an attempt to provide for a 14 day grace period for people selling one main home and buying another was defeated.

The supplement was proposed by Finance Secretary John Swinney to protect first time buyers in Scotland from potential distortions to the property market in the wake of Chancellor George Osborne’s announcement in November 2015 of a similar stamp duty land tax charge being introduced south of the border.

Coming into force on 1 April 2016, it will affect all relevant transactions above £40,000. These cover people investing in buy to let as well as those buying a second home, though there is an exemption where six or more homes are bought at once, so as not to discourage larger investment in property to let.

At stage 2, the bill was amended to protect people moving from one main home to another so that if there is a delay in the sale, no additional tax would be payable if the sale can be completed before the LBTT return is submitted. Mr Swinney said this would give in effect a grace period of between three and six days.

However Conservative MSP Gavin Brown moved an amendment, backed by the Law Society of Scotland, for a grace period of 14 days. He argued that this would prevent people in many transactions having to fund in the short term a “punitive” charge that could amount to thousands of pounds, even if it could be reclaimed on the sale being completed. Evidence before the Finance Committee had been strongly in favour of such a concession.

The amendment was lost by 66 votes to 44 after Mr Swinney argued that it would undermine the important feature of LBTT that registration of title was permitted only when arrangements for payment of LBTT were put in place, and would impose an administrative burden on Revenue Scotland in ensuring payment of the supplement. He undertook to keep he matter under review, and said ministers had power to introduce further relief by order if considered appropriate.

After the vote Mr Swinney commented: “Our LBTT additional homes supplement will ensure that opportunities for first time buyers to enter the housing market in Scotland remain as strong as they possibly can.”