Solicitors will play a key role as Wales moves closer to the operation of devolved taxes, writes professor Mark Drakeford.
The Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Bill was introduced to the National Assembly for Wales on 12 September. Engagement with professionals helped to shape the bill and here I would like to outline the next steps in tax devolution for Wales.
The last Welsh tax dates back to the time of Llywelyn ap Gruffudd, the last of the native Welsh princes, who imposed a tax on great beasts. The Land Transaction and Anti-avoidance of Devolved Taxes (Wales) Bill will create the first new Welsh tax for almost 800 years. If passed, it will create a land transaction tax, which will replace the existing stamp duty land tax and come into effect in April 2018.
As part of the development of this tax bill, the Welsh government has engaged extensively with professionals to ensure their views are heard and represented as we shape this and our other new tax – land disposals tax.
Consistency in the operation of land transaction tax was a clear priority. We have therefore kept key elements of stamp duty land tax, including the approach to partnerships, trusts and companies and to reliefs and exemptions. This should ensure a smooth transition for the property market.
The bill provides for the development of a general anti-avoidance rule, similar to the approach taken by the Scottish government when stamp duty land tax was devolved a few years ago. A single, overarching and robust anti-avoidance rule will also apply to all reliefs in Wales. This approach will extend, simplify and strengthen existing stamp duty land tax legislation.
The bill also puts in place a framework for setting the rates and bands for land transaction tax. These will be set closer to April 2018 to reflect economic conditions at the time. We will adopt a marginal tax structure – the bill legislates for a progressive approach to rates and bands, similar to the Scottish approach. We have published a research paper which highlights some of the issues, which must be considered when setting rates and bands.
The National Assembly passed the Tax Collection and Management (Wales) Act in April 2016, providing Wales with the powers to establish the Welsh Revenue Authority (WRA) – the Welsh equivalent to HMRC – which will collect and manage devolved taxes. The WRA will be the first non-ministerial department of the Welsh government.
The WRA will develop expertise and deliver high-quality, digital tax services which are both efficient and effective. It will shape services to meet Welsh needs and priorities and build a platform with the flexibility to manage and collect future taxes.
A chair will be appointed in early 2017 to ensure the WRA is in a position to shape the development and direction of the organisation before it becomes fully operational in April 2018.
The Welsh government is working closely with professionals and practitioners to ensure land transaction tax collection processes and procedures meet their needs. It is looking at ways in which the WRA can deliver a cost-effective and efficient service to taxpayers and their agents. The Law Society and its practitioners are important partners and will play a key role as we move closer to the operation of devolved taxes in April 2018.
The introduction of the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Bill marks a significant step in our tax devolution journey, enabling the Welsh government to develop a tax system which is simpler and fairer and which supports public services, jobs and growth.
Taxes fund the Welsh public services on which we rely. The new powers in the Land Transaction and Anti-avoidance of Devolved Taxes (Wales) Bill and the Landfill Disposals Tax (Wales) Bill, which will be introduced later this year, provide Wales with an opportunity to involve people in decisions about raising revenue and how that money will be spent.
We value the involvement we have had with stakeholders to date and want to continue working in this way as we develop taxes which meet the needs and priorities of people in Wales.
Further information on the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Bill is here.
A copy of the research paper about setting land transaction tax rates and bands is now available.
For further information, contact: WelshTreasury@wales.gsi.gov.uk or TrysorlysCymru@cymru.gsi.gov.uk
Professor Mark Drakeford is Welsh government cabinet secretary for finance and local government