Scotland's home building industry are warning Ministers of a drop in future housing market activity unless the Land and Buildings Transaction Tax (LBTT) band is extended.

Homes for Scotland (HfS) repeated its call for the extension of the current 5% band in order to address the 'considerable drop' in activity at the higher end of the property ladder as new figures revealed Revenue Scotland collected £55 million less than expected in receipts from LBTT.

The trade body said the drop has occurred as buyers either can't afford it or consider the 'perceived punitive nature' of the tax and choose to stay put.

Nicola Barclay, Chief Executive of HfS, said feedback from its members "shows that the present system (which varies considerably from that south of the border) is creating significant barriers".

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"As we have expressed in submissions to the Scottish Government and Scottish Parliament, if we are to have a healthy and well-functioning housing market, we need a tax framework that enables movement up and down all price levels," she said.

"Whilst in volume terms this may currently impact only a relatively small number of customers, the concern must be that, if aspirational buyers are unable or indeed choose not to move, this will create blockages lower down and place more pressure on the price of the fewer homes that do come on the market.

"Not only will this distort the market, it will also ultimately exacerbate the housing crisis. Clearly, this is not good news for the three quarters of Scots who wish to own their own home and will also only serve to put further pressure on the social and private rented sectors.

"Crucially, however, as we see from today's Revenue Scotland report, LBTT also has a massive impact on the Budget and public finances. If the Scottish Government acts to boost activity at the higher end of the market, we believe it would result in a greater tax take than is being achieved at present."

(LM)