Is Scottish Government turning against the commercial property sector?

1 December 2011

Is Scottish Government turning against the commercial property sector?

Leading UK law firm Shepherd and Wedderburn has raised concerns that details emerging from the Scotland Bill and new Scottish Government policy are having an adverse impact on the nation’s commercial property sector.

David Mitchell, a partner in the firm’s property and infrastructure practice says that the initially pro-property position of the Scottish Parliament is being eroded by a combination of measures in the Scotland Bill and new Scottish Government policies including the imposition of large retailer rates and the decision to abolish empty property rates.

The Scotland Bill was passed by the House in Commons in June and is currently awaiting progress to Committee stage in the House of Lords. The legislation has been described as the largest single transfer of fiscal power from Westminster in the history of the United Kingdom.

Mitchell said: “With the SNP administration at Holyrood, we are in danger of going from what seemed a positive, pro-property position in Scotland to one which is now raising concerns. We welcomed the approval of tax incremental finance (TIFs) rolled out within local authorities and the intention to reform Stamp Duty Land Tax (SDLT) to align it with existing property practice north of the border.

“However recent months have given cause for concern. After initially dropping the large retailer rates levy – a move which followed pressure from the industry – it has now been brought back in a slightly different guise but with a similar threat to investment in Scotland. Allied to the proposed abolition of empty rates relief there is cause to question what the Scotland Bill will, in reality, mean for the Scottish property sector.

“Property has always been viewed as an easy tax take, one that politicians feel won’t cost them many votes. Are the changes to SDLT going to be what we hoped for or will they simply be a means to fill a funding black hole? Given the bruised and battered state of the Scottish property market and its extremely low transactional volumes, an increase in a transactional tax such as SDLT will only serve to worsen the position further.”