LTT rates and bands – and the number of bands - are expected to be announced next month.
Inevitably, the practical impact of LTT on the property market will depend very much on the bands and rates that are set. Any divergence between SDLT and LTT rates may influence the timing of transactions in the run-up to April 2018, distorting the market in the short term by either delaying transactions in Wales or bringing them forward, depending on which rates are more favourable from the perspective of the taxpayer. Significant differences may well have a longer-term economic impact by influencing where property investment is made, particularly in the case of large commercial transactions.
The existence of different property tax regimes in England and Wales also has the potential to make life a little more complicated - and expensive - for businesses involved in cross-border property transactions, such as the purchase of a portfolio of properties, some located in Wales and others in England. Even if tax rates and bands are similar, advisers will need to be familiar with two tax regimes and two tax returns will be required, although that administrative burden will be reduced if there is an efficient electronic filing system in place for LTT returns, as there is for SDLT returns.
An added layer of complexity may be introduced from a legal perspective by the fact that the legislation governing LTT will exist in English and in Welsh, both having equal standing.
However, provided LTT achieves its goals – and much will depend on the rates that are set – these administrative and legal complications should prove to be of minor consequence in the overall scheme of things. Indeed, a simpler and more user-friendly property tax regime may prove to be an inducement to investment in Wales.