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Ministers facing shortfall

Revenue from LBTT ‘to fall short of forecasts’

Property for saleFurther evidence has emerged that revenue from the Scottish government’s tax on property will fall short of forecasts.

Revenue Scotland figures, analysed by the Scottish Property Federation (SPF), reveal that receipts from the Land and Buildings Transaction Tax (LBTT) dropped £16 million between December and January to £34.3m.

The SPF says this will make it “very difficult for the Scottish Government to meet its LBTT forecast for 2016-17 and potentially in the following years”.

In December the Scottish Government reduced its expectations for LBTT revenue, particularly from the residential sector. 

However, evidence is growing that even these reduced targets will be difficult to achieve, said the SPF.

“It is becoming clearer that non-residential returns of LBTT are likely to be substantially less than they were in 2015-16,” it said.

Non-residential property transactions in particular have fallen, reflecting wider data on reduced commercial property investment transactions over the past two years.

In the residential sector, after a period of significant growth in the number of higher value transactions from 2012 until April 2015, the markets have stagnated in terms of numbers and total values. This has meant that the forecasted growth in residential LBTT has not materialised.

David Melhuish 1
David Melhuish (photo by Terry Murden)

David Melhuish (right), director of the SPF, said: “A weaker commercial property transaction market is the main driver behind these lower LBTT returns.

“However, the failure to increase transactions and revenues at the higher value residential market is also weighing down on Scottish Government LBTT expectations. 

“Without the new Additional Dwelling Supplement (ADS) second homes tax, the Scottish Government would be seeing much lower returns of LBTT than was achieved in its first year of operation in 2015-16. 

“We have welcomed the government’s decision to maintain a slight competitive advantage with commercial property transaction taxes in the rest of the UK – in a period of weaker commercial transactions this is critical. 

“We think an increase in the 5% residential LBTT band threshold to £500,000 from its current, relatively low, level of £325,000 could help to stimulate a growth in transactions in the £400,000 to £750,000 range.  This would help both the market and wider economy.”


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