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That is an interesting point and I can see the member’s line of thinking. I am not aware that that specific analysis has been done, but I will undertake to look at that scenario to see whether we can furnish the member with data.

It is an on-going process and will help to inform the broader LBTT picture. At each point in the budget cycle for the annual budget, we make decisions about what tax rates should be. At this point, I think that making the change in ADS rates is the right decision.

Thank you very much, convener. Good morning to you and the committee, and a happy new year to you all.

The Land and Buildings Transaction Tax (additional amount: transactions relating to second homes etc) (Scotland) Amendment Order 2024 provides for the changes to the land and buildings transaction tax rates and bands that were set out in the Scottish budget on 4 December 2024. It increases the rate of the additional dwelling supplement from 6 per cent to 8 per cent, with the change intended to protect opportunities for first-time buyers and home movers by further helping them compete with buy-to-let investors and second home owners.

The change is also forecast to raise much-needed revenue at a time when public finances are under significant pressure. The Scottish Fiscal Commission estimates that it will raise an additional £32 million in 2025-26 and £31 million a year on average over the remainder of the forecast period through to 2029-30.

As you will be aware, the legislation provides for the rate increase to take effect the day after the Scottish budget statement—that is, on 5 December 2024. That is now a well-established arrangement for such changes; it prevents the possibility of forestalling, which would have reduced the revenue impact next financial year and would have run counter to the policy intent. It is also intended to provide certainty for taxpayers with the acknowledgement that the legislation must be approved by the Scottish Parliament in order to remain in force. As with previous rate changes, the order includes a transitional provision to ensure that anyone who entered into a transaction on or prior to 4 December will not pay the increased rate.

At this point, I take the opportunity to remind the committee of my entry in the register of members’ interests in respect of ownership of residential properties for let, and I look forward to members’ questions.

My point is that the investment to build additional stock for the market is not impacted, because companies that are investing significant amounts to build large numbers of properties are excluded from ADS. As I said, the data that we have suggests that the number of individual registered landlords has been broadly static for the past three years or so, and that the number of properties that are registered for let has increased. That would suggest that there is not that impact on the market.

You have to distinguish between investment for the buying of existing properties and investment for the building of new properties. The investment is going into the market to—

A number of factors impact the outputs that result from these decisions—

—so, everything else being equal, you would be able to have a controlled experiment and to understand exactly what the impact was. However, you do not have that, because there are all kinds of factors that we could talk about. There is a range of things that impact the decisions that individuals make about investing in properties or whether to enter or exit the market as well as the number of transactions and so on—you name it.

However, we can say fairly certainly that the SFC took a perspective on the impact on behaviour of the previous increase from 4 per cent to 6 per cent but that the data has shown that, if anything, the SFC underestimated the revenue as a consequence of the increase and that there has been less of an impact on the market than was anticipated. That is certainly what the data suggests with regard to that particular point. The SFC then used similar data to make an assessment of the future impact and, obviously, time will tell what the impact will be. You can have a very robust set of data, but all the indications are that, in Laffer curve terms, we are still probably well to the left of the inflection point with regard to ADS.

It is evident that, as a consequence of the increase, the differential between what a first-time buyer and a landlord have to pay will widen, and, therefore, when they are competing against an invest-to-let landlord to buy a property, a first-time buyer will have a competitive advantage. Again, everything else being equal, it is fairly certain that a first-time buyer—or any buyer who is going to live in the property and will therefore not pay ADS—will have an advantage in that regard.

You could argue that. However, as I say, the narrative that landlords are leaving the market clearly is not the case. You can compare that with the counterfactual of what would have happened had the policy not been introduced, but it is not true that landlords are leaving the market. It may be true that not as many are entering the market—I take that point—but, as I said, I do not think that we have data that supports that one way or the other. There is clearly a broader issue around housing supply more generally, but that is outside the scope of this discussion.

It is probably not true to say that it is an unregulated market; it is quite a well-regulated market, but obviously there are policy changes, some aspects of which are around the scope and extent of the regulation. However, as I said, that is outside the scope of this discussion, which is on ADS.

With regard to the impact, as its name says, ADS is designed for additional dwellings, so it covers second homes and properties that are let out. In terms of both of those, making more homes available for buyers who are owner-occupiers is the direction of travel that we are keen to see, to give more of an advantage to first-time and other buyers in the market.