Draft Land Transaction Tax and Anti-avoidance | KPMG | UK

Draft Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Bill

Draft Land Transaction Tax and Anti-avoidance

Draft legislation providing for the Welsh devolved tax to replace SDLT in 2018 has been published.


Associate Partner, Head of Stamp Taxes



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The Wales Act 2014 paved the way for the introduction of the Welsh Land Transaction Tax (LTT), which is expected to replace Stamp Duty Land Tax (SDLT) on transactions involving Welsh land and property from 1 April 2018. After a consultation process, the Welsh Government has published the draft LTT and Anti-avoidance of Devolved Taxes (Wales) Bill (the Bill) on 5 July 2016. As expected, the Bill does not differ greatly from the current SDLT legislation, with the exception of a small number of key changes, explained in more detail below. The draft Bill has been released without the proposed rates, which we understand are likely to be released in the Autumn of 2017.

The draft Bill shares many similarities with the current SDLT legislation, including the use of a slice system. Many of the reliefs and exemptions (and the qualifying conditions for those reliefs and exemptions to be available) are substantially similar. Examples of subtle changes specific to LTT include:

  • An overarching mini-general anti-avoidance rule or motive test as a pre-condition to claiming any LTT relief;
  • Changes to provide greater consistency between the treatment of fixed term leases that continue after the term expires; and
  • Leases for an indefinite term.

A more substantial change is provisions for an exemption for new residential leases where rents are the only consideration provided. This is in contrast to SDLT, which charges such leases at 1 percent of the net present value of the rents exceeding £125,000.

There are currently no provisions within the draft Bill to introduce a super rate, or surcharge, on the acquisition of additional or buy-to-let properties or the use of companies to purchase dwellings to act as envelopes, as exists for SDLT. Whether this is a policy decision, or there was not enough time to include this within the current version of the Bill, is not yet known.

The tax rates and tax bands for LTT are to be confirmed. It is likely that they will differ from SDLT, reflecting the difference in average property values between the two countries (the average property price in England is currently £224,731 and £139,383 in Wales). Adopting the current SDLT residential nil-rate threshold of £125,000 would see significantly more transactions pay zero tax, or fall within the lower rate bands.

As its name implies, the draft Bill also provides for a general anti-avoidance rule (GAAR), which is largely similar to the GAAR introduced for land and buildings transaction tax, which replaced SDLT in Scotland on 1 April 2015. The GAAR provides the Welsh Revenue Authority powers to adjust the amount of tax payable in instances where ‘artificial’ tax avoidance arrangements have been used to reduce the amount of Welsh devolved taxes due.

Finally, the Bill provides for amendments to be made to the Tax Collection and Management (Wales) Act 2016, including a late payment penalty of 5 percent of the tax due, followed by a further 5 percent if the tax remains unpaid after six months, and an additional 5 percent if the tax still remains unpaid after 12 months. This is in contrast to the current SDLT provisions which only provides for late payment interest, and has not yet ‘switched on’ a similar late payment penalty regime.

For further information, please contact a member of the stamp taxes team or your usual KPMG contact.

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