Strong end to 2017 for comp-prop market delivers Christmas LBTT bonus

Revenues from the Land and Buildings Transaction Tax (LBTT) remained at near record levels in December 2017, according to figures released by Revenue Scotland and analysed by the Scottish Property Federation.

Nearly £62m was raised by the devolved tax in December, which is one of the highest monthly revenues generated by LBTT since its introduction in April 2015. The year-on-year increase is £13.4m and the expectation is that revenues will meet government forecasts.

A buoyant commercial market was the main driver behind the figures, with several high value transactions taking place during the month helping to almost match November’s record high. Commercial LBTT revenues have been significantly higher than 2016 levels for the past two months, reflecting a strong end to the year for commercial sales over £5 million.

LBTT revenue from residential sales, however, has plateaued after several months of reduced activity at the £325k+ level of the market.

Current rates and thresholds mean that LBTT revenue is disproportionally dependent on higher value residential transactions, which peaked in August and have since fallen back.

Despite monthly residential LBTT revenues treading water at the £33m mark, the Scottish Government is still likely to see a record amount ofLBTT from residential sales in 2017/18. This has been due, in part, to the £88m paid to date through the Additional Dwellings Supplement (second homes tax), which came into effect in April 2016.

David Melhuish, director of the SPF, said: “It is clear from this year’s tax receipts that the government’s revenue goes up significantly when there are more higher value homes sold. However, our members tell us that this level of the market is being supressed by the current rates and thresholds, which see residential sales values above £325,000 taxed at a relatively steep 10 per cent.

“If the threshold for the 10 per cent rate of LBTT was raised to £500,000, we believe that there would be more activity in the Scottish residential market. Not only would this help to support the property industry in Scotland and allow families to move up the property ladder, but increased transactions could offset any reduced revenue from realigning the thresholds.”

He added: “It is also valuable to note the importance of a strong commercial property market. This has significantly boosted revenues recently, following two months where figures considerably exceeded those of 2016/17. Maintaining a focus on this sector remains key.”