House movers should not be caught by "second home" tax: Society

The additional tax to be imposed on second homes should be monitored closely for its effects on people who are simply trying to move house, the Law Society of Scotland believes.

The Society's comments came ahead of today's stage 3 debate on the Land and Buildings Transaction Tax (Amendment) (Scotland) Bill, which would levy a 3% tax supplement on the total purchase price of an additional residential property purchase above £40,000. Because of the low threshold, the supplement will be payable in transactions below £145,000 where the LBTT rate would otherwise be nil.

Concerns centre on people moving house who experience an unexpected delay in completing their sale. The Bill has been amended to provide some protection, but the Society has argued for a grace period of up to 30 days, to reduce the risk of purchasers having to pay the additional 3% ahead of the sale completing and then claiming it back.

"This creates an additional administrative burden for both the purchaser and Revenue Scotland as well as presenting funding issues for the purchaser", Isobel d’Inverno, convener of the Law Society of Scotland’s Tax Committee, said.

“We understand the Scottish Government’s policy intent behind the new tax on second homes. However we want to be sure that the tax is fairly applied and will not penalise people unnecessarily."

She added: “Given rules around determining the main residence on the basis of facts, we also have concerns that separated or divorced partners might end up with a jointly owned property for a lengthy period, an ex-partner unable to buy out the other ex-partner. We believe consideration should be given to offering relief in such cases.

“The land and buildings transaction tax is one of the first new taxes to be devolved to Scotland. It’s important that the additional dwellings supplement works as well as possible from the outset.”