Holyrood's Finance Committee has issued a call for evidence on the effect of the tax surcharge on purchases of second homes in Finance Secretary John Swinney's draft Budget for 2016-17.

Mr Swinney proposes to levy a land and buildings transaction tax (LBTT) supplement on purchases of additional residential properties, such as buy-to-let properties and second homes, of three percentage points of the total price of the property for all relevant transactions above £40,000. The LBTT on such a home bought for £200,000, for example, would rise from £1,100 to £7,100.

The supplement is expected to come into effect from 1 April 2016. The Scottish Government estimates that it will raise between £17m and £29m in 2016-17.

The draft Budget acknowledges that the levy will introduce a tax charge for additional properties below the present LBTT tax threshold of £145,000, but that it targets the lower end of the market because demand for properties for investment purposes or second homes in this sector could make it difficult for new entrants to the market to purchase a main residence.

Views would be welcomed by the committee on:

  • the Scottish Government’s overall policy objectives in introducing the supplement and, in particular, whether it Is likely to “complement the Government’s commitment to supporting home ownership in a balanced and sustainable way”, and “helps to ensure that the tax charge is proportionate to the taxpayer’s ability to pay”;
  • the proposed 3% rate and the £40,000 purchase price at which it is proposed to take effect;
  • the estimated revenue from the measure;
  • any reliefs or exemptions that might form part of the legislation;
  • the potential for tax avoidance and how this should be addressed;
  • the likely impact of forestalling;
  • and any other relevant matters.

Click here to view the call for evidence. The closing date for responses is Friday 29 January 2016. Oral evidence sessions are likely to be held in February.