25th July 2017 back to news

SNP's Tax Raid on Homes in Crisis

SNP's Tax Raid on Homes in Crisis




- Minister's levy on middle class is crippling Scotland's housing market, warn experts


The SNP was last night under pressure to overhaul its tax raid on homes after experts said the levy had crippled the housing market.


Finance secretary Derek Mackay was told his punitive tax on middle-class homes had caused a major slowdown in the Scottish property market.


Thousands of people have decided they cannot afford to buy a new home and Mr Mackay's flagship policy was criticised by the Royal Institution of Chartered Surveyors (RICS), which called on the minister to urgently review the policy, insisting it has caused a property 'bottle-neck'.


It comes after it was disclosed that his Land and Building Transaction Tax (LBTT) had raised £57million less than had been predicted, leaving a black hole in the Scottish Government's finances.


The RICS claimed the policy has led to a 'distortion' of the property market, with househunters abandoning plans to move up the property ladder, instead opting to refurbish their home or rent.


RICS spokesman Hew Edgar said: 'A predicted post-election bounceback in residential property transactions has been patchy due to price pressures and issues in certain sections of the market created by the banding in LBTT. 


'The issues due to the LBTT bandings must be addressed to take the bottle-neck created by those who are put off moving property and are adopting the "improve, don't move" mentality. We urge the Scottish Government to review the LBTT framework and devise a banding and threshold structure that would improve market fluidity and address the current uncertainty which is stymying property transactions.'


This is the latest high profile intervention calling for the SNP to reconsider the replacement for stamp duty, amid fears it is stifling the property market.


LBTT was introduced two years ago and those buying homes costing less than £145,000 no longer pay any tax. But it is significantly dearer to buy a property costing more than £350,000 and LBTT can add £45,000 to the cost of a house priced at £1million if bought in Scotland rather than England. 


Yesterday, Chartered Surveyors criticised the tax. 


Edinburgh Surveyor John Brown said: 'LBTT is a fundamental market for interference, particularly in the £500,000 plus price bracket where significant sums [of LBTT] become due. This is causing distortion in market demand.'


Greg Davidson of Graham + Sibbald said: 'LBTT and general uncertainty continues to have a grip on the market. If LBTT could be at a sensible level, the market is ready to go.'


Figures analysed by the Scottish Property Federation show LBTT generated revenues of £481million in 2016-17. That has created a £57million black hole in what the Government predicted it would receive in revenue from the tax.


Scottish Conservative finance spokesman Murdo Fraser said: 'The SNP was warned about the impact its stamp duty replacement would have. It ignored that advice, now Scotland's property market is paying the price.'


A Scottish Government spokesman said: 'The housing market is not experiencing the same level of slowdown as other parket of the UK. LBTT is more progressive than Stamp Duty Land Tax (SDLT). This means 93 percent of taxpayers in Scotland are paying the same or less than under SDLT and has contributed to the growth in house purchase activity in the first quarter of 2017.'


Nationalists, fairly bristled with pride when John Swinney took the wraps off the Land and Buildings Transactions Tax, the replacement for stamp duty and the first tax levied by a Government in Edinburgh for some 300 years.


But just as Mr Swinney's 'Honest John' soubriquet was based on his ability to hit legally binding spending targets when he was finance secretary, so LBTT was built on flimsy foundations. It was subject to an immediate rejig when it became apparent it would force Scots to pay more than homebuyers in England.


And the amount the tax is predicted to raise has consistently been overstated as its excessive costs stalled the housing market.


Now the Royal Institution of Chartered Surveyors wants Finance Secretary Derek Mackay to urgently review the tax as the number of home movers in Scotland has dropped by 8 percent.


There is little evidence the unimpressive Mr Mackay grasps the implications of all this. After all, he is the man who had to have the Laffer Curve - which holds that lower tax increase revenue yield - explained to him.


The RICS warns the property market is being distorted by the SNP's back-handed policy as families look to make home improvements rather than move, while others seek to rent, not buy.


It is a double whammy for the country, damaging both the key property sector and blowing a hole estimated at £57million in Mr Mackay's overall budget.


LBTT was brought in on April 1, 2015, but there's nothing remotely amusing about this April Fool's prank.