Legislation was proposed yesterday by the Welsh authorities to levy the first tax in Wales for over 800 years. If approved, the new land transaction tax, which will be payable on the purchase or lease of land or a building in Wales over a certain price, will replace stamp duty land tax from April, 2018.
The proposed changes are being introduced through the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Bill. The bill sets out the key principles of the new tax; including amongst other things the types of transactions, the procedures for setting rates and bands, how the tax will be calculated, and what reliefs, if any, will apply to land transactions. There are also further measures in the new bill to tackle other issues like tax avoidance. However, detailed information about the rates and bands for the new land transaction tax will not be published until later – ‘closer to April, 2018’ – as the Welsh government believes it is important to take into account its own priorities and the economic conditions at the time.
What will the new Welsh land transaction tax look like? Well, according to the authorities the new land transaction tax will be broadly similar to stamp duty land tax, thereby providing consistency and stability for businesses and home buyers in Wales. However, there will also be one or two differences which the government believes will help to improve efficiency and better reflect what are deemed to be unique Welsh circumstances and priorities. The principal changes include:
- A new overarching general anti-avoidance rule to help prevent and robustly tackle tax avoidance, and a broad targeted anti-avoidance rule which applies to all reliefs
- The exclusion of two reliefs in relation to the demutualisation of insurance companies and building societies
- Amendments to some other reliefs so they operate better or in a more relevant way to Wales
- The rent element of new residential leases will be exempt from tax under land transaction tax, and
- The simplification of rules in relation to leases.
The Welsh authorities believe that not only will the introduction of the new land transaction tax be a historic achievement for Wales as a country; it will also be a milestone in the process of devolution. It will also provide much needed revenue for the country. In 2014-15, £170m was raised from stamp duty land tax in Wales, with 55,000 transactions taking place. This is expected to rise to £244m by 2018-19.
Speaking about the draft legislation, Welsh Assembly Finance Secretary, Mark Drakeford, said:
‘This is an historic milestone in the devolution of tax powers to Wales. This bill marks another step towards the creation of taxes that are more suited to the needs of Wales and support Welsh public services.’
‘We have consulted widely about how this tax should work for Wales and listened to a range of views. This is why it will broadly mirror stamp duty land tax, providing the consistency and stability business tell us they need, and providing a smooth transaction for home buyers and the property market,’ he added.
However, enthusiasm for the new legislation from Welsh lawyers was far more muted. Rufus Ballaster, partner at City firm Carter Lemon Camerons, told the Law Society Gazette that he believed the new regime would cause difficulties for conveyancers:
‘How many more distinctly Welsh aspects of the art and skill of conveyancing will need to change before someone like me needs a colleague (or to buy-in relevant consultancy expert) to help on “Welsh aspects” of a deal? Currently,qualify in the law of England and Wales: that law is uniform, despite the scope for regional variation.’
‘At some point, it may be that a Welsh lawyer would need to prove knowledge of SDLT (and Cheshire brine searches, to pick another regional issue applying in England only) in order to do English property work. An English lawyer would also need to prove similar knowledge of distinctly Welsh-only conveyancing issues to do Welsh property work. That would be sad but may be an inevitable consequence of devolution, if the devolved power is used to change fundamentals affecting conveyancing practice,’ he added.