The legislation to impose a land and buildings transaction tax supplement on the purchase of additional residential properties has been supported in principle by the Scottish Parliament’s Finance Committee, but with a warning of the need to balance the interests of first time buyers with those of renters, house builders and investors.

In their stage 1 report on the Land and Buildings Transactions Tax (Amendment) (Scotland) Bill, published today, the MSPs state that it is essential that the Scottish Government closely monitors the impact of the supplement on rent levels, especially in areas where rents are already high. They voice concerns over the limited time available for scrutiny of the proposals.

The bill introduces a 3% LBTT supplement on purchases of additional residential properties in Scotland (such as buy-to-let properties and second homes) over £40,000. As drafted, the bill would apply across the board to all relevant purchases above the threshold. It reflects a similar additional stamp duty charge south of the border, announced by Chancellor George Osborne.

Finance Secretary John Swinney said it was necessary to follow suit inorder to protect the interests of first time buyers in Scotland. However, in agreeing to the general principles of the bill, the committee emphasises the need to balance the various interests in the property market, to protect the supply of new homes. It therefore calls for the introduction of a relief on bulk purchases of six properties or more.

It also notes concerns about the potential impact on the private rental sector through a reduction in the number of homes available for rent and higher rental costs, and supports a number of reliefs including for registered social landlords and local authorities, and for student accommodation, along with a grace period to allow time for a previous property to be sold.

Convener Kenneth Gibson MSP commented: “Whilst the committee is supportive of the bill’s aim to support first time buyers entry into the property market, there are a number of areas that we wish to see addressed as the bill progresses through Parliament.

“The committee heard concerns, for instance, about the impact on people who rent, whether through choice or necessity. The Royal Institute of Chartered Surveyors has suggested that the supplement could lead to a rise in rents as additional costs are passed on to tenants. We feel that the support given to first time buyers must not be at the expense of those people who rent their homes.”

Mr Gibson agreed that the truncated timetable was "far from ideal", but added: "This is a problem that I would expect to occur with greater frequency as the Parliament assumes more powers and the Scottish Government responds to decisions made by the UK Chancellor that impact on Scotland. There is a need for Parliament and Government to develop a process that allows for transparent consultation and scrutiny whilst recognising that it may occasionally be necessary for swift decisions to be taken on tax matters.”

In addfition to a comprehensive review by the Government once sufficient data is available, the committee wants the Scottish Fiscal Commission to provide a commentary on the first six months of outturn figures for the supplement including an analysis of the impact of forestalling – property transactions to beat the new surcharge – by the end of November 2016.

The report asks whether the Scottish Government has considered ring-fencing revenue from the LBTT supplement to support help to buy or other areas of investment in the housing sector.

Click here to view the report.