Written Statement - Responses to the consultation on a 'Land Transaction Tax'

The Wales Act 2014, passed by Parliament last December, sets out new fiscal powers for Wales, including legislative competence over taxation of transactions involving interests in land and of disposals to landfill.  From April 2018 the existing UK taxes in these areas – Stamp Duty Land Tax (SDLT) and Landfill Tax (LfT) – will be replaced in Wales by Land Transaction Tax (LTT) and Landfill Disposals Tax (LDT).  These will be the first Welsh taxes in over 800 years, and will provide an opportunity to develop Welsh tax arrangements in ways that reflect the needs of our communities and businesses.  In July the Welsh Government laid before the National Assembly for Wales the Tax Collection and Management (Wales) Bill, marking a significant step in preparing the way for tax devolution .

To help inform the policy and structure of the new devolved taxes, I published two consultations in February seeking views on the proposals for LTT and LDT.  Both of these closed in May and  I am pleased to issue a summary of responses to the LTT consultation today.  I have separately issued a summary of the responses to the LDT consultation.

The LTT consultation asked questions about where it would be appropriate to keep the new Welsh tax consistent with the current SDLT, and also where changes or improvements could be made which could have a positive effect for Wales.

The consultation paper also reaffirmed my aim to develop taxes that: are fair to businesses and individuals; provide stability and certainty for tax payers; are simple, with clear rules which seek to minimise compliance and administration costs; and support growth and jobs, in turn helping to tackle poverty.

I would also like to extend my thanks to my Tax Advisory Group and the LTT Technical Expert Group for the central role they have played in helping to shape the proposals in the consultation document and in ensuring a good, representative response from stakeholders.

A clear message from the LTT consultation responses was that consistency with SDLT, wherever appropriate, was highly desirable for taxpayers, agents, and business.  To aid preparation for future LTT legislation, I propose to retain a number of the key elements of the current SDLT structure.

The majority of consultation respondents highlighted the positive impact of the SDLT ‘marginal rate’ system, introduced by the UK Government for residential property in December 2014, this followed the decision by Scottish Government to use a ‘marginal rate’ system for Land and Buildings Transaction Tax.  This welcome change closely reflected the emerging thinking for SDLT reform here in Wales, demonstrating the power of devolution to effect wider improvement across the UK.  I have already confirmed that under LTT residential property in Wales will be taxed on a marginal basis.

The current SDLT approach to partnerships, trusts and companies, and reliefs and exemptions would also be broadly retained.  These are well understood by the Welsh business community, and will provide the consistency that businesses desire.  Furthermore, it will also assist a smooth transition for the property market, enabling individuals and businesses to plan confidently for the future.

Decision on LTT rates and bands will be for the next Welsh Government to consider, taking into account the economic factors in play closer to April 2018.  I note that the consultation responses underlined clearly that an early announcement on rates would offer assurance and support to business.  The next Welsh Government will need to be mindful of this when considering the appropriate timing of its announcement.

The great majority of people in Wales pay the required amount of tax in a timely way, and the Welsh Revenue Authority will have an important role in helping them with this.  Getting the tax due right first time is in everyone’s interest, as it minimises the need to amend errors later and saves time and cost.  I recognise the importance of establishing arrangements that will help taxpayers.  I have previously announced that my preferred partner to support the collection of LTT is HMRC, and I am confident that their involvement will help with a smooth transition at the introduction of LTT and provide consistency for the taxpayer and agents.

To ensure the integrity and fairness of devolved taxes, I intend for the new Welsh Revenue Authority (WRA) to be able to take a tough stance on any incidents of tax evasion and avoidance.  The Tax Collection and Management (Wales) Bill provides for the WRA to have the necessary investigation powers to challenge unacceptable behaviour effectively and robustly.   I am today confirming my intention to develop a Welsh tax avoidance rule in relation to the two devolved taxes, and to provide clarification about and additional assurance to prevent and tackle tax avoidance.  This will be for the next Government to consider as they introduce the tax specific legislation after the next election.  

Over the coming months, my officials will continue to engage widely with a range of interested stakeholders and tax experts in order to inform the development of LTT so that it works well for Wales for house buyers, builders and Welsh businesses.  I will be considering options on how I can support this by making our Nation an even more attractive place to live and to set up and expand business operations.  This programme of work will enable the next Welsh Government to introduce legislation soon after the Assembly elections in May 2016.