The Land Transaction Tax and Anti-avoidance of Devolved Taxes Bill received Royal Assent on 24 May 2017 having been introduced into the National Assembly for Wales on 12 September 2016. The Bill outlines proposals to introduce land transaction tax (LTT), which will replace Stamp Duty Land Tax (SDLT) in Wales from April 2018
The new proposals for LTT are part of the Welsh Government’s aim to strengthen Wales’ ability to manage their own affairs and it is hoped that the new tax will develop a focus on the needs and priorities of Wales.
LTT will become payable when a lease, building or land is purchased above the relevant threshold. The new legislation will be broadly consistent with the SDLT rules and will mirror the current position as to partnerships, companies, trusts, reliefs and exemptions.
The new rules will impact both buyers and sellers of property interests, together with those involved in the process such as builders, developers and the legal profession. Perhaps, most importantly, the tax imposed on transactions may have an effect on the price at which a particular property will sell and the willingness of potential purchasers to commit to the transaction.
Rates and bands have not yet been decided, but will be announced in October 2017. The rates will need to reflect the conditions of the economy closer to April 2018 and will need to balance the interest of the taxpayers, the Welsh property market and the wider economy.
The government publication on LTT bands says that there will be different rates and/or bands for residential, non-residential transactions, freehold and leasehold transactions, in order to reflect the different ways in which those markets operate. In addition, the government has confirmed that it intends to adopt a marginal rate structure for residential and non-residential property transactions.
The higher rates on purchases of additional residential properties will also apply to the new regime in Wales. It is also likely that the Welsh Government will be able to alter rates and bands with immediate effect due to the need to respond to any sudden changes in the property market or wider economy.
With regard to properties bought in England and Wales, the current position is that LTT will have to be paid on the proportion of the property in Wales and SDLT will be charged on the land in England. Further clarity is being sought on this.
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