A recent report by the Scottish Parliament’s Finance and Constitution Committee has concluded that the country’s transition to the new Land & Buildings Transaction Tax (LBTT) was ‘operationally successful’.

However, the report goes on to say that it is too early to draw any definitive conclusions on the impact of LBTT rates and bands after only one year of operation, and a lack of consistency in forecast and outturn data.

LBTT took effect in Scotland from April 2015, replacing Stamp Duty as the property tax in Scotland. The majority of stakeholders who contributed to the parliamentary inquiry agreed that the rates had been of benefit to the first time buyer housing market.

“It’s reasonable to say year one of the LBTT went smoothly and was operationally successful,” explained Finance and Constitution Committee convener Bruce Crawford MSP. “That said, a key challenge for us has been the lack of consistency in the presentation of data relating to LBTT. That made it difficult to compare forecast and outturn data and to fully assess the tax’s impact on the property market in Scotland.”

“There are also challenges in identifying ‘causality’ for the changes seen in the housing market - in short, it’s difficult, based on the data, to separate out the impact of LBTT rates and bands from extraneous factors, such as the general economic situation,” he said.

“Our Committee therefore recommends that the Scottish Government’s review of the first year of LBTT includes an analysis of the behavioural response to LBTT, particularly in relation to homes costing between £325k and £750k,” he added. “This should include an assessment of the likelihood of an on-going response and an analysis of the impact of extraneous factors.” 

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