10th January 2017

What Goes Up Must Come Down

As Sir Isaac Newton famously said “what goes up must come down”.  This applies to everything apart from taxes.   This shown by the failed attempt in the 70’s to massively increase the tax burden which had a negative impact on the tax take. It was also shown by Reaganomics in the 80’s when tax came down and the take actually increased.  I am disappointed that the Scottish Government has not reviewed the rates of the current residential Land and Buildings Transaction Tax bands and in particular extend the 5% rate beyond the current £325,000 cap.   I understand that revenue raised from LBTT continues to drop despite the increase in rate and this is surely a reflection on the damaging impact this is having on the activity in the Scottish property market.   I would call on the Government to review the additional dwelling supplement which again I think is proving unwieldy and is having a detrimental impact on the property market activity.   Speaking from experience, I act for a number of investors who have either stopped their purchasing programme or alternatively have factored in the 3% into the price being paid and reduced the price accordingly.  I am not against the idea of an additional dwelling supplement but think perhaps a more realistic 1% level would have been preferable.  I also think there is scope to amend the Capital Gains Tax rules so that the relief for selling your sole or main residence is tapered perhaps over a 5 year period i.e. you must have stayed in your sole or main residence for 5 years or more, to benefit from the full relief.  The benefit of this tax is that it is not paid by a purchaser and would be paid out of profit, making it a lot more bearable.  It is time that the Scottish Government realised the importance of the housing market to society and the economy and supported it accordingly.

Lindsay Darroch
Partner – Head of Property 



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