Land transactions in the UK have been subject to Stamp Duty Land Tax (SDLT) since 2003, but we now have different regimes for Scotland and Wales.

Devolution has seen a separate tax charged (Land & Buildings Transaction Tax or LBTT) on Scottish land transactions, and now a Welsh version – Land Transaction Tax, or LTT – has received Royal Assent, taking effect in April 2018.

We do not have the tax rates and bandings yet, which will be announced in October, but there are significant differences in the application of the rules. This would appear to signal a regime with lower tax charges, with some relief from the inequities of recent changes to SDLT, but with wider powers to fight avoidance.

On the whole, the intent has been to enact a similar framework to SDLT – including those tortuous partnership rules – but some parts of the legislation are easier to follow, having the appearance of the tax law re-write versions of UK acts. Others are lifted straight from SDLT.

The LTT will still have residential and non-residential rates, and a higher residential rate for second properties. The legislation, as passed, does not indicate how much higher the higher rate will be – it is a 3% premium in the rest of the UK (including Scotland), but the Welsh premium is yet to be defined.

The approach to the LTT higher rate is similar to that of SDLT with a separate rate table, unlike the Scottish LBTT which is a 3% surcharge. It seems likely that there will be similar inequities, with some unintended targets hit by the extra charge and intended targets missed, but some of the problems in SDLT have been addressed, and one significant loophole closed.

A major difference of principle is that new residential leases will not be subject to LTT, although commercial leases will. Existing residential leases will already have been subject to SDLT before LTT commenced.

There appears to be no reference in this Act to enveloped property. That may follow when the rates are published later in the year.

A Welsh General Anti Avoidance Rule (GAAR) will apply to all Welsh devolved taxes, and appears to be wide ranging in its scope, but without the safeguard of an Advisory panel as is the case with the main UK GAAR.

There is also a Targeted Anti Avoidance Rule (a TAAR) which is a motive test, prohibiting any relief where a transaction forms part of tax avoidance arrangements. There is clear scope for differing interpretations here.

Finally, the tax will be administered by a new body – the Welsh Revenue Authority (WRA).

On the whole, it would appear to be business as usual, although we still wait to see what tax rates will be applied. Care will be needed as there are subtle differences between LTT and SDLT, and if you are buying a piece of land that straddles the border, then the fun will really start!


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