Agents hit out at plans in Scotland to increase tax on additional home purchases

Sales and lettings agents in Scotland have hit out at plans to increase the Additional Dwelling Supplement (ADS) from 3% to 4%, saying it will have an adverse effect, particularly for the buy to let sector.

ADS was introduced in April 2016 for purchases of additional residential properties in Scotland, including buy to let, costing £40,000 or more. Last month Finance Secretary Derek Mackay announced the plan to increase the amount by 1%.

But the Association of Residential Letting Agents (ARLA) and the National Association of Estate Agents (NAEA) have no issued a joint statement saying that the proposal is short-sighted and that, if implemented, it will act as a further deterrent to buy to let investors.

They are warning that the extra cost incurred by landlords will then simply be passed on to tenants though increased rent. ‘With rental cost across much of Scotland rising faster than the rest of the UK, we consider that the direction of travel by the Scottish Government is wrong and we would like to see the ADS scrapped altogether,’ the statement adds.

They also believe that increasing ADS would also have a knock on effect, in that tenants will find it increasingly difficult to put money aside for a deposit to buy their own home and say that the Scottish Government would be better off pursuing an advanced home building programme which would encourage first time buyers.

The increase comes at a time when the number of private rented properties available on the market is showing a slight downturn since the introduction of ADS in April 2016. Indeed, research published by the Scottish Governments found that 27% of landlords are planning to exit the sector within the next five years.

ARLA and the NAEA say this points to a potentially dwindling private rented sector in Scotland which and could result in tenancies being terminated, putting people closer to the bread-line, and ultimately could increase homelessness.

They also say that a decrease in private rented stock will take away much needed housing that makes up the shortfall between social housing and home ownership, which will need to be remedied through public funding towards more social housing.

‘Tenants paying higher rents as house prices increase will make home ownership much harder to achieve, resulting in the Scottish Government achieving less LBTT for non-second home residential sales,’ the statement points out.

If we can persuade the Scottish Government to overturn the ADS payments as well as helping to slow escalating rents there would be a knock-on effect of decreased expenditure by the Government on discretionary housing payments, which are used to bulk up any shortfall in the rent paid by tenants in receipt of Universal Credit,’ it adds.

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