Experts have warned ministers that the SNP’s plans for a new property tax poses a risk to the economy. This measure may dissuade companies and business people who are considering moving to Scotland.
The Land and Buildings Transaction Tax (LBTT) may mean the cost of opening up a large operation in Scotland as opposed to England could be as much as £100,000 more. The cost of buying large homes will also increase under the property tax plan, which will discourage business owners and key employees from relocating to that country.
The Finance Minister has refused to set out the exact rates that will be introduced under the plan. Examples used to illustrate how the tax plan will work suggest a rate of 4.4 per cent on all transactions over £250,000 is being considered. An additional tax of 7.5 per cent is being proposed for all homes worth more than £180,000.
If a large employer decided to buy a large commercial property for £25 million, the company would pay £100,000 more under the LBTT plan than under stamp duty, which will continue to be used in England.
Investors will no doubt be hesitant about investing in Scotland if the country is a much more expensive place to do business than England. LBTT rates should be clarified and spelled out as soon as possible so that investors who are considering a move don’t rule out Scotland due to uncertainty.
The Scottish government has announced that tax rates and thresholds for the LBTT will be announced in April 2015. A spokesperson has said that the “vast majority” of commercial real estate transactions valued under £2 million would involve lower tax payments. Until details are released, commercial investors are likely to be hesitant about firming up plans north of the border.
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