The announcements do nothing to simplify Scotland's unnecessarily complex tax system. The Scottish Budget did bring changes for business to consider when looking to invest in Scotland including:
- A reduction in the lower rate and threshold of non-residential land and buildings transaction tax ("LBTT") from 3% to 1%, an increase in the upper rate from 4.5% to 5%, and a reduction in the starting threshold of the upper rate from £350k to £250k. Taken together, the Scottish Government claims that non-residential LBTT rates and bands are the most competitive in the UK for all non-residential transactions.*
- An increase in the LBTT additional dwelling supplement from 3% to 4%* *The Scottish Government has confirmed the "new rates will not apply to a transaction where the effective date is on or after 25 January 2019 if contracts have been entered into prior to 12 December 2018.
- The introduction of two new LBTT reliefs over the course of 2019: a relief for the ‘seeding’ (initial transfer) of properties into a Property Authorised Investment Fund ("PAIF") or Co-owned Authorised Contractual Scheme ("CoACS") and a relief for when units in CoACS are exchanged. Despite both of these reliefs being present in the SDLT legislation in some guise or another it has taken much lobbying by the Scottish property industry and the Law Society of Scotland to convince the Scottish Government that these measures will encourage investment in Scotland and provide a level playing field across the UK.
The following were also announced:
- Income tax threshold changes but no introduction of the £50,000 higher rate threshold to benefit RUK as a result of the Autumn UK Budget statement 2018.
- The out-of-town levy, giving councils the ability to charge higher rates for out-of-town businesses, will not be introduced. This is a decision that will be welcomed by the Scottish Chamber of Commerce and CBI Scotland but one that many small businesses were keen was backed in an attempt to regenerate the High Street.
- Economic growth in Scotland has been revised upwards and is forecast higher than the UK as a whole. There will also be a continued focus on the delivery of Fair Work and inclusive growth.
- An increase in capital investment by £1.56 billion by end of the next Parliament. This will include a £50 million capital fund to support town centres diversity and more than £180 million towards city and region deals.
- Initial funding of £130 million to support the establishment of the Scottish National Investment Bank.
- Doubling Scottish Development International’s presence in Europe and a £5 million investment this year as part of a three year, £20 million plan to support more companies to export.
- Support for Women Returners and Parents in very low income work.
- No change to the Legal Aid budget was announced
There are still some uncertainties. Given the SNP's minority government, none of these measures can be guaranteed. The SNP also reserved their position to revisit the terms of this Budget in the event of a 'no deal Brexit'. The draft legislation and consultations referred to in the Budget are awaited.