Tax income ‘lost to Holyrood’ if stamp duty promise matched

Cutting Scottish stamp duty to match the UK Government could cost Holyrood a “significant” amount in taxes but would make nine in 10 house sales in Scotland “tax free”, it has been claimed.

The Scottish Government would not be drawn on whether it will match the UK Government’s plans to scrap stamp duty on houses worth less than £500,000 as part of Westminster’s economic stimulus plan in the wake of the coronavirus shutdown.

Finance Secretary Kate Forbes is due to give her response to the chancellor’s statement to MSPS today and described it as “disappointing and underwhelming” yesterday.

Stamp duty, or LBTT (land and buildings transaction tax) as it is known in Scotland, is devolved to Holyrood and is one of the few ways the Scottish Government can raise funds.

The Chartered Institute of Taxation (CIOT) claims removing the duty would see up to 90% of Scotland’s homes being sold “tax free”.

At the moment, no tax is taken on a house sale of a value less than £145,000 in Scotland. Between £145,001 and £250,000 a 2% rate is taken, 5% on the portion between £250,000 and £325,000, 10% within the next band up to £750,000 and 12% over that.

If the change was introduced someone buying a house at the average Scottish house price of £179,541 would expect to save £690 in LBTT, according to the CIOT.

Joanne Walker, CIOT Scottish technical officer, said: “If the Scottish Government increased the threshold for LBTT to £500,000 it would have the effect of taking the vast majority of currently taxable house sales in Scotland out of LBTT altogether, resulting in a significant reduction in LBTT receipts.

“It is uncertain who would gain from a change of this kind. A 2011 UK Government study found that a previous cut to help first-time buyers was mostly absorbed in a higher house price, benefiting sellers rather than purchasers.”

Scottish Conservative leader Jackson Carlaw said the reduction could stimulate the housing market and urged the Scottish Government to follow the chancellor’s lead.

“This change will not just increase the number of properties bought and sold after months of lockdown,” he said.

“It will provide a boost to all those trades who depend on people moving home, decorating, renovating and generally making choices which keep the wheels turning for small businesses – the importance of this move for jobs and growth in Scotland cannot be underestimated.”

First Minister Nicola Sturgeon would not be drawn on whether Holyrood would follow suit when asked during the coronavirus press briefing, which broadcast at the same time as the chancellor’s statement.

She said: “I am sure you will allow me to take a bit of time to consider the detail of all of the chancellor’s announcement and discuss these with the finance secretary and others.

“Where there are decisions for us in some of the decisions he has announced, we will set that out quickly.

“The finance secretary has a statement in parliament and will respond to the chancellor’s statement.”

David Alexander, joint managing director of property management firm apropos, said the move would “provide an immediate boost in confidence for buyers”.

He added: “Scotland must follow suit if we are to face a level playing field and encourage home buyers to continue to engage with the market during these difficult economic times.”

Meanwhile, the cut in VAT for food, accommodation and visitor attractions was welcomed by Marc Crothall, chief executive of the Scottish Tourism Alliance, who hailed it as a “huge catalyst for the tourism economy”.

He added: “This will come as a huge relief today for thousands of pubs, restaurants, accommodation providers and visitor attractions.”