Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017
This act received royal assent on 24 May. From April 2018, Land Transaction Tax (LTT) will replace UK Stamp Duty Land Tax (SDLT) in Wales. This legislation is linked to the Tax Collection and Management (Wales) Act 2016, which provides the powers and duties to collect the tax.
The act sets out:
- the key principles of LTT, such as the types of transactions that will incur a charge to LTT and the person liable to pay LTT;
- the procedure for setting tax rates and bands;
- how the tax will be calculated and what reliefs may apply;
- specific measures to tackle devolved tax avoidance;
- the application of the act in relation to leases;
- the specific provisions applicable to a variety of persons and bodies in respect of LTT;
- the provision for making a land transaction return and for the payment of the tax; and
- duties on taxpayers to make payments, and pay penalties and interest in certain circumstances.
The proposed tax rates and bands will be announced by October.
Higher rates on certain residential property transactions have been charged in Wales through SDLT since April 2016. The act also charges these higher rates in Wales.
The Welsh Revenue Authority will undertake all the collection and management functions for LTT from April 2018. It will also be responsible for developing guidance to assist taxpayers, and their agents, in complying with their obligations.
The key changes to SDLT are:
- A General Anti-Avoidance Rule which will enable the Welsh Revenue Authority to recover any devolved tax that has been avoided as a result of an ‘artificial’ tax avoidance arrangement. By contrast, SDLT applies to ‘abusive’ tax arrangements, and establishes a General Anti-Avoidance Rule Advisory Panel.
- Relief Targeted Anti-Avoidance Rules which include a single, clear rule applicable to all reliefs that prohibits a relief from being claimed where the transaction forms part of tax avoidance arrangements. SDLT includes a number of specific rules to tackle potential avoidance activity of particular reliefs.
- Rules relating to the deferral of tax in cases of contingent or uncertain consideration. The SDLT set out similar rules in secondary legislation.
- The rent element of newly granted residential leases will be exempt from tax under LTT, although Welsh government ministers have the power to make it chargeable. The rent element of newly granted residential leases is chargeable under SDLT.
- LTT contains some additional rules for higher rates residential property transactions, which do not exist in SDLT legislation. These include:
- The acquisition of certain residential properties is exempt from higher rates where an interest in a dwelling is retained by the buyer pursuant to a court order in cases of divorce or dissolution of a civil partnership;
- Whether a taxpayer owns or acquires a residential property subject to a lease is judged at the end of the effective date of the acquisition of the residential property. This includes an anti-avoidance rule to prevent taxpayers from manipulating the rule to avoid paying the higher rates;
- A dwelling, purchased and held by a court-appointed deputy on behalf of a minor who lacks mental capacity under the Mental Capacity Act 2005, is not deemed to be owned by that child’s parents and is therefore, generally, not subject to higher rates;
- LTT requires an assessment for the higher rates tax liability to be undertaken on ‘intermediate’ transactions (and a further return submitted to the Welsh Revenue Authority if additional tax is due);
- Changes to rules relating to property that is inherited – spouses or civil partners who are no longer living together are not to have their respective interests combined in order to establish whether the interest held exceeds 50%; and
- Clarification of rules in relation to major interests.
Public Health (Wales) Act 2017
This act received royal assent on 3 July. The act makes provision for:
- Restatement of restrictions on smoking in enclosed and substantially enclosed public and work places, giving Welsh ministers a regulation-making power to extend the restrictions on smoking to additional premises or vehicles;
- Restrictions on smoking in school grounds, hospital grounds and public playgrounds;
- The creation of a national register of retailers of tobacco and nicotine products;
- A regulation-making power for Welsh ministers to add to the offences which contribute to a Restricted Premises Order in Wales;
- Prohibiting the handing over of tobacco and/or nicotine products to a person under the age of 18;
- The creation of a mandatory licensing scheme for practitioners and businesses carrying out ‘special procedures’, namely acupuncture, body piercing, electrolysis and tattooing;
- A prohibition on the intimate piercing of persons under the age of 16 years;
- A requirement for Welsh ministers to make regulations to require public bodies to carry out health impact assessments in specified circumstances. This makes Wales the first country in the world to require mandatory health impact assessment following the Australian state of Tasmania and the Canadian provinces of British Colombia and Quebec;
- Changing the arrangements for determining applications for entry on to the pharmaceutical list of health boards, to a system based on the pharmaceutical needs of local communities;
- A requirement for local authorities to prepare a local strategy to plan how they will meet the needs of their communities for accessing toilet facilities for public use; and
- A ‘food authority’ under the Food Hygiene Rating (Wales) Act 2013 to retain fixed penalty receipts resulting from offences under that act, for the purpose of enforcing the food hygiene rating scheme.
Trade Union (Wales) Act 2017
This act received its royal assent on 7 September and came into force on 13 September. It part-disapplies to devolved Welsh public bodies and to trade unions in public services delivered by devolved Welsh public bodies the following provisions of the UK Trade Union Act 2016:
- a requirement for a 40% ballot threshold to be met before workers employed in ‘important’ public services may take industrial action;
- a requirement for public sector employers to monitor arrangements for time spent on facility time, that is, the time permitted to employees for the purpose of carrying out trade union duties such as representing members, both individually, and collectively in negotiations;
- a power for the secretary of state to limit facility time;
- and conditions on the circumstances in which deductions of trade union subscriptions may be made from wages.
The act also includes a provision that prohibits devolved Welsh public bodies from using agency workers to provide cover during industrial action. There is existing comparable UK law but the UK government has consulted on repealing this provision.
Devolved Welsh public bodies include the Welsh NHS, local authorities, schools, fire services and Welsh government-sponsored bodies in Wales. The act does not disapply provisions in the 2016 act in relation to services provided by a contractor to a devolved Welsh public body.
The Welsh government takes the view that the Trade Union Act 2016 has an ‘adverse effect on the social partnership approach’ in Wales. During the passage of the (Trade Union) Wales Act there was tension between the Welsh and UK governments over the bill with the UK government insisting that industrial relations is a reserved matter. In the event, the UK government did not refer the case to the Supreme Court to adjudicate on whether or not it was within the assembly’s powers. However, the UK government has said that it will legislate for industrial relations on a Great Britain-wide level after the new devolutionary settlement in the Wales Act 2017 comes into force in April 2018.
Landfill Disposals Tax (Wales) Act 2017
This act received its royal assent on 7 September and from April 2018 landfill disposals tax will replace landfill tax in Wales.
Like landfill tax, landfill disposals tax will be a tax on the disposal of material as waste to landfill and will be charged by weight. It will be payable by landfill site operators, who pass on these costs to waste operators through their gate fee.
The act aims to guard against waste tourism by using similar processes and the same approach to tax rates as landfill tax. The key difference is that UK legislation only enables landfill tax to be charged on disposals of waste at authorised landfill sites. In Wales, landfill disposals tax will also be charged on unauthorised disposals of waste. There will be a third tax rate– the ‘unauthorised disposals rate’ – this is expected to be higher than the standard tax rate. Specific investigatory powers will ensure the Welsh Revenue Authority is able to identify those who are responsible for paying the tax and calculate the tax due.
Possible change to electoral law rules
The National Assembly for Wales will gain powers to set its own election rules under changes brought in under the Wales Act 2017, which is due to come into force in April 2018.
In anticipation of this, the Assembly Commission has announced that it will explore changes to electoral rules to allow assembly members to job-share. This is an attempt to increase the diversity of the assembly with the hope of attracting more women and disabled people into politics.
In 2003, the assembly had an equal number of male and female members. Since then there has been a decline in the number of women AMs: 41.7% of assembly members returned in the 2016 assembly elections were women. However, the National Assembly for Wales remains the most representative of the devolved legislatures, and more representative of both sexes than the House of Commons.
Electoral reform of local government
The Welsh government is consulting on whether 16- and 17-year-olds in Wales should be given the right to vote in council elections. The consultation, which closes on 10 October, also asks whether all foreign citizens normally resident in Wales should have the right to vote in local elections; whether electronic voting would make voting easier; whether elections should be held on days other than Thursdays; and whether proportional representation should be used in local government elections.
Study into banning letting agents’ fees to tenants
A study commissioned by the Welsh government to look at letting agents’ fees charged to tenants renting in the private rented sector in Wales has been published.
In Scotland, setup fees to tenants are banned, while both England and Northern Ireland have recently consulted on proposals to ban setup fees to tenants, and it has been recently announced that the UK government will bring this ban into effect in England.
The study has recommended that the Welsh government should consider a ban on fees to tenants, along similar lines to that being proposed by the English government and already in place in Scotland. Renewal fees and tenancy termination fees (excluding those for leaving early) should be included in any ban.
Other recommendations include:
- The Welsh government should consider allowing a small holding deposit (such as one week’s rent) in order to ensure tenants show some financial commitment before agents take a property off the market.
- Charges for work a tenant creates during a tenancy, such as losing keys or failing to be in when a contractor calls at a time they have arranged, should legitimately be charged for at cost, along similar lines to the English consultation proposals.
- Agents and landlords should be allowed to charge tenants who want to be released early from a contract, in return for a definite acceptance of a contract termination.
Right to buy social housing suspended in Cardiff
The right to buy has been suspended in Cardiff. This has occurred while legislation is proceeding through the assembly which, if passed, will suspend the right to buy throughout the whole of Wales.
Richard Owen is associate professor at the College of Law and Criminology in Swansea.