Revenue Scotland annual report reveals LBTT shortfall

homes-for-sale-450x209Tax professionals have welcomed another strong performance from the body charged with administering and collecting Scotland’s devolved taxes but cautioned that the numbers are likely to fuel further concerns over the Scottish Government’s flagship Land and Buildings Transaction Tax (LBTT).

Revenue Scotland’s annual report for 2016/17 showed an increase in the total overall amount of tax collected from £572 million in 2015/16 to £633m in 2016/17, with the total overall amount of tax collected since Revenue Scotland’s creation in 2015 passing the £1 billion mark.

It was also reported that 98.8% of tax returns were submitted online, compared with 98.1% in 2015/16, with more than 93% of tax payments made on time.

Meanwhile, receipts generated from Scottish Landfill Tax (SLfT) outperformed forecasts, generating £149m – £16m more than forecast.

However, despite an increase in the total amount of revenue generated from the LBTT property tax between 2015/16 and 2016/17, the £484m generated was £54.4m less than the Scottish Government’s own forecasts contained in its 2016/17 budget.

The figures are likely to further fuel opposition to the new tax which last week was targeted for criticism by estate agents Savills which said it had curtailed the million pound market in Scotland.

Another survey carried out by law firm McEwan Fraser Legal found that one in five potential Scottish homebuyers has cited the new property tax as a reason for their decision not to move in the past two years, with two thirds branding it ‘unfair’.

Responding to today’s Revenue Scotland report, Moira Kelly, chair of the CIOT Scotland Technical Committee, said: “2016/17 has been another year of progress and achievement for Revenue Scotland as it gets to grips with Scotland’s devolved tax powers.

“There has been an almost across the board upturn in the organisation’s performance, with more tax collected, increased compliance and enforcement activity and more and more people submitting their returns online and on time.

“But while Revenue Scotland has overseen increases in the overall amount of LBTT and SLfT generated, it’s impossible not to note the discrepancies between the actual amount of LBTT generated and the amount that was initially forecasted by Scottish Ministers in the budget for 2016/17.

“Forecasting is – as we often hear – a very inexact science, but these figures are likely to fuel further concerns relating to the vulnerability of LBTT receipts and the potential impact that this may have on future Scottish budgets.”

Finance secretary Derek Mackay said: “Revenue Scotland has continued to operate effectively and efficiently, with operating costs lower than last year and more than £1bn of tax collected over its first two years of operation.

“The report indicates that £633m was collected across the fully devolved taxes in 2016-17. That revenue has helped to fund our vital public services and support our ambition to create a more successful country, with opportunity for all to flourish through increased sustainable economic growth.”

Revenue Scotland chairman Dr Keith Nicholson said: “The total tax collected in 2016-17 shows an increase of over 10% compared to our first operating year, contributing even more to Scotland’s public services.”

“An important milestone was also reached, with the amount of tax collected by Revenue Scotland in its first two years of operating exceeding £1bn. The total transferred to the Scottish Consolidated Fund between 1 April 2015, when operations began, and 31 March 2017 was £1.15bn.”

A Scottish Government spokesman added: “A total of £633m was collected in 2016-17, which represents £61m more in income – a rise of 10% – than was delivered in the previous financial year.”

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