SPF: tax relief for developers will make Scotland more competitive

15 Dec 2014

Policy area: Development, Taxation

The Scottish Property Federation (SPF) has warmly welcomed the decision of Finance Secretary John Swinney to introduce a targeted form of development transactions tax relief. 

The relief will mean that where a development is funded via a simultaneous sub sale, land and buildings transaction tax (LBTT) will be paid only once, as the developer at the heart of the transaction will receive relief.  

The SPF has campaigned for a change in policy since the omission of sub sale relief in late 2012, fearing that the omission could cause Scotland to be less attractive to investors compared to the rest of the UK. 

Initially, the Scottish Government had proposed a refund mechanism whereby relief was withheld until a completion certificate for a development was produced.  The SPF strongly resisted this approach arguing that it represented the development industry ‘providing short-term finance to the Scottish Government’.  

The SPF recently gave evidence to the Scottish Parliament outlioning further changes that it would like to see made to LBTT. It would like to see the Scottish Government match the 4% top UK rate for non-domestic property transactions under LBTT, which is currently 4.5% for transactions over £350,000, and for the introduction of a 5-6% rate for residential property transactions between £250,000 and £1million. 

John Hamilton, Chair of SPF said: “The decision to revise the LBTT proposals in order to boost investment in development funding is strongly welcome.

“Without a doubt if we had not seen a change of policy then Scottish property development and investment would have faced a serious disadvantage in attracting development funding compared to the industry in the rest of the UK.  We warmly welcome the decision to introduce an effective relief mechanism for targeted sub-sale relief for development transactions.  This mechanism will support forward funding arrangements between developers and institutional funders and crucially it will keep us competitive for attracting development finance with the wider UK.”

Separately, the SPF also welcomes decisions to reduce the burden of Multiple Dwellings Relief in order to support large scale residential investments and also to drop plans for a tax on licenses to occupy retail properties in Airports and other locations.  

ENDS