The Welsh government has introduced the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Bill, which provides for the devolved tax to replace SDLT in Wales from April 2018.
The Welsh land transaction tax (LTT) will broadly mirror SDLT, with the addition of some new anti-avoidance rules and modifications in relation to leases and various reliefs. Key differences from SDLT include:
· a new overarching general anti-avoidance rule (GAAR), along similar lines to the Scottish GAAR, applying to arrangements leading to the tax advantage that are considered to be ‘artificial’, rather than the narrower UK criterion of ‘abusive’;
· a broad targeted anti-avoidance rule (TAAR) which applies to all reliefs, rather than the individual TAARs under UK SDLT;
· the exclusion of two reliefs in relation to the demutualisation of insurance companies and building societies;
· amendments to some other reliefs not relevant to Wales, such as crofting community right-to-buy relief and relief for the 15% slab rate for non-natural persons acquiring residential property, which is not being adopted in Wales;
· exemption for the rent element of new residential leases under LTT. In the UK, SDLT is charged at 1% on the amount by which the ‘net present value’ of a new residential property lease over its total duration exceeds £125,000. In Scotland, the rent element for residential leases is exempt. In Wales, the value of the vast majority of new residential leases would be below this threshold, which means that exempting this element will reduce the administrative burden; and
· simplification of rules in relation to leases. This will include giving broadly the same treatment to leases for an indefinite term as exist for fixed leases that continue after the end of the term; and provision for situations where the new lease is backdated to a date other than the termination date of the old lease.
Actual rates and bands for LTT in Wales will be announced closer to April 2018.
Welsh finance secretary, Mark Drakeford, said the Welsh government has used, ‘the opportunity that tax devolution presents to make some changes to improve efficiency, effectiveness and to focus on Welsh circumstances and priorities. The Bill is in line with our clear principles for taxes in Wales – to create a fairer and simpler system, which supports jobs and growth’.
The Welsh government has introduced the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Bill, which provides for the devolved tax to replace SDLT in Wales from April 2018.
The Welsh land transaction tax (LTT) will broadly mirror SDLT, with the addition of some new anti-avoidance rules and modifications in relation to leases and various reliefs. Key differences from SDLT include:
· a new overarching general anti-avoidance rule (GAAR), along similar lines to the Scottish GAAR, applying to arrangements leading to the tax advantage that are considered to be ‘artificial’, rather than the narrower UK criterion of ‘abusive’;
· a broad targeted anti-avoidance rule (TAAR) which applies to all reliefs, rather than the individual TAARs under UK SDLT;
· the exclusion of two reliefs in relation to the demutualisation of insurance companies and building societies;
· amendments to some other reliefs not relevant to Wales, such as crofting community right-to-buy relief and relief for the 15% slab rate for non-natural persons acquiring residential property, which is not being adopted in Wales;
· exemption for the rent element of new residential leases under LTT. In the UK, SDLT is charged at 1% on the amount by which the ‘net present value’ of a new residential property lease over its total duration exceeds £125,000. In Scotland, the rent element for residential leases is exempt. In Wales, the value of the vast majority of new residential leases would be below this threshold, which means that exempting this element will reduce the administrative burden; and
· simplification of rules in relation to leases. This will include giving broadly the same treatment to leases for an indefinite term as exist for fixed leases that continue after the end of the term; and provision for situations where the new lease is backdated to a date other than the termination date of the old lease.
Actual rates and bands for LTT in Wales will be announced closer to April 2018.
Welsh finance secretary, Mark Drakeford, said the Welsh government has used, ‘the opportunity that tax devolution presents to make some changes to improve efficiency, effectiveness and to focus on Welsh circumstances and priorities. The Bill is in line with our clear principles for taxes in Wales – to create a fairer and simpler system, which supports jobs and growth’.
