The institute has written to the Scottish government, which is believed to be bringing forward a bill later this year to give retrospective effect to the LBTT (Additional Amount - Second Homes Main Residence Relief) (Scotland) Order 2017.

ICAS says this is an opportunity to address other concerns in the LBTT legislation, including what may be unintended consequences of the introduction of a new tax. These centre on share pledges and group relief; relief for pension fund transfers; and seeding relief.

The letter states: ‘There are some areas of detailed policy in LBTT which lead to commercial outcomes that are different when compared with SDLT. Most notably, according to a recent Revenue Scotland opinion understood to have been given in July 2017, groups cannot get group relief essentially wherever they have bank borrowing. This is the case where the bank borrowing is secured by share pledges, as it frequently will be.’

‘Additionally, in a demerger transaction where a property is transferred out of a trading company to another group company prior to the sale of the trading company. There are provisions which deny relief where there are arrangements for the company which acquires the property to leave the group in Sch.10 LBTT (S) Act 2013.

‘It is understood that Revenue Scotland is of the view that relief is not available in these circumstances; but this is a different approach to HMRC where relief from SDLT would be available.’

ICAS also wants pension scheme transfers removed from the scope of LBTT, as they are under SDLT.  It argues the charge could prevent pension scheme transfers from taking place which are in the interests of both sponsoring employers and scheme members, while it places a new tax burden on defined benefit pensions schemes, most of which have a funding deficit, and risks making commercial property in Scotland a less desirable investment relative to property elsewhere in the UK.

Another example where Scotland may be put at a commercial disadvantage when compared with the rest of the UK is the lack of seeding relief for property authorised investment funds (PAIFs) and coownership authorised contractual schemes (ACS).

The letter states: ‘Inevitably, if the fiscal environment appears to be disadvantageous, investment decisions may be influenced and Scottish properties within a UK portfolio may be excluded from a transfer into these collective investment regimes. We recommend that a formal consultation on this issue should be issued by the Scottish government, with a view to examining the extent of this commercial disadvantage and how it might be addressed.’

ICAS’s submission to the Scottish government is here.

Report by Pat Sweet