The emergence of a Wales-only body of law takes a new step forward today with the introduction of legislation designed to create the first Welsh tax in 800 years.
If approved, the land transaction tax, payable on the purchase or lease of a building or land in Wales over a certain price, will replace stamp duty land tax from April 2018.
It is being introduced through the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Bill, the first bill to be introduced as part of the Welsh government’s new legislative programme.
The bill sets out the key principles of the new tax, including the types of transactions, the procedure for setting rates and bands, how the tax will be calculated, and what reliefs will apply.
It also introduces measures to tackle tax avoidance. Rates and bands for land transaction tax will be revealed 'closer to April 2018', the Welsh government said, taking into account economic conditions and priorities at the time.
According to the government, land transaction tax broadly mirrors stamp duty land tax, providing consistency and stability for businesses and home buyers in Wales but it introduces some changes, which are designed to improve efficiency and to reflect unique Welsh circumstances and priorities.
Key changes include:
- A new overarching general anti-avoidance rule to help prevent and robustly tackle tax avoidance;
- A broad targeted anti-avoidance rule which applies to all reliefs;
- The exclusion of two reliefs in relation to the demutualisation of insurance companies and building societies;
- Amendments to some other reliefs so they operate better or in a more relevant way to Wales;
- The rent element of new residential leases will be exempt from tax under land transaction tax; and
- The simplification of rules in relation to leases.
In 2014-15, £170m was raised from stamp duty land tax in Wales, with 55,000 transactions taking place. This is expected to rise to £244m by 2018-19.
Finance secretary Mark Drakeford said: 'This is an historic milestone in the devolution of tax powers to Wales. This bill marks another step towards the creation of taxes that are more suited to the needs of Wales and support Welsh public services.
'We have consulted widely about how this tax should work for Wales and listened to a range of views. This is why it will broadly mirror stamp duty land tax, providing the consistency and stability business tell us they need, and providing a smooth transaction for home buyers and the property market.
'We have also been able to learn from the devolution of the tax to Scotland.'
Wales last enjoyed independent tax-raising powers under the 13th-century ruler Llywelyn the Great.
Rufus Ballaster, partner at City firm Carter Lemon Camerons, predicted that the new regime would cause difficulties for conveyancers.
‘How many more distinctly Welsh aspects of the art and skill of conveyancing will need to change before someone like me needs a colleague (or to buy-in relevant consultancy expert) to help on “Welsh aspects” of a deal?’ he commented. ‘Currently, solicitors qualify in the law of England and Wales: that law is uniform, despite the scope for regional variation.
‘At some point, it may be that a Welsh lawyer would need to prove knowledge of SDLT (and Cheshire brine searches, to pick another regional issue applying in England only) in order to do English property work.
'An English lawyer would also need to prove similar knowledge of distinctly Welsh-only conveyancing issues to do Welsh property work. That would be sad but may be an inevitable consequence of devolution, if the devolved power is used to change fundamentals affecting conveyancing practice.’