Plans to replace stamp duty with a more progressive tax have been welcomed by the organisation representing solicitor estate agents in Scotland’s capital.
The Edinburgh Solicitor Property Centre (ESPC) agreed with the move away from the current “slab” structure of stamp duty, which it said creates inequalities in the level of taxation paid, particularly around the thresholds between tax bands.
At present, a difference in property selling price of just £1 can lead to thousands of pounds in additional tax for the buyer, the ESPC said.
But it warned that the new system of taxation proposed in the Scottish Government’s Land and Buildings Transaction Tax (Scotland) Bill must have an awareness of regional variations in the property market.
The ESPC also warned that the rate of tax increases in relation to selling price must be well-balanced in order to allow people to move up and down the property ladder.
Giving evidence on the legislation at Holyrood’s Finance Committee, ESPC business analyst David Marshall said: “I don’t think it would be practical to have regional stamp duty I think that certainly would lead to complexity and would need constant revision.
“I do think however there needs to be awareness of regional markets and the make-up of those when setting stamp duty rates.
“The move away from (the current system) is something that we are very much in favour of, it is just that rate of increase that we need to be careful of to make sure that the differential in tax, for example for someone (buying a property) at £250,000 isn’t massively less than someone at (buying a property) £350,000, because if you do see that large disparity then that could create inequalities in the market.”
It is proposed that the new legislation will come into force from April 2015.
At present, stamp duty is applied at 1% for properties costing between £125,000 and £250,000 and 3% on those sold for £250,000 to £500,000. This means that if a house is sold for £260,000, the buyer must pay 3% of the whole amount, a total of £7,800, while for a house costing £240,000, the charge is just 1% (£2,400).
The Scottish Government said the replacement tax would create “a proportional progressive structure, which includes a nil rate band and at least two other bands”. Under the new system only the proportion of the price above the threshold is liable to the higher rate of tax.