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News Release
EMBARGO: NOT FOR BROADCAST OR PUBLICATION
BEFORE 0001 ON SUNDAY 23 NOVEMBER

November 23, 2008

TAX BREAKS PLEA TO DARLING

Deputy First Minister Nicola Sturgeon has called for the

Chancellor, Alistair Darling, to grasp the opportunity to provide
major investment for housing in Scotland.

Ms Sturgeon has said now is the time for the Chancellor to inject
major capital public sector investment in affordable housing in
Scotland.

Ahead of his pre-Budget Report next week, Ms Sturgeon said Mr

Darling must take bold steps to invigorate the housing market,
and help Scots home owners who have lost their jobs.

The Deputy First Minister suggested to Mr Darling key steps to

help the Scottish economy:

Injecting major capital public sector investment in

affordable housing in Scotland.

Boosting Scotland’s construction industry by applying

a permanent reduced VAT rate of five per cent for
Registered Social Landlords repairing and maintaining
their housing stock.

Applying a temporary reduced VAT rate of five per

cent for homeowners repairing and renewing houses.

Speeding up changes to Income Support for Mortgage

Interest (ISMI), where the UK Government helps pay
interest on a mortgage. The Scottish Government is
pressing for help to start from January 2009, to cover
interest on mortgages up to 175,000 pounds.

Address some of the barriers that hinder large scale

investment in the housing market, particularly in the
private rented sector, which is bearing much of the
brunt of the credit crunch in terms of increasing

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 demand and rents. Revisit anomalous rules on stamp
duty for bulk purchases and encourage institutional
investment by revisiting the rules for residential Real
Estate Investment Trusts(REIT).

Ms Sturgeon said:

“Next week, Alistair Darling has a gilt-edged opportunity to do

the right thing by lending a helping hand to boost Scotland’s
housing industry.

“There has never been a more opportune time for the Chancellor
to inject significant funding for much needed affordable housing
across Scotland.

“At a time when so many jobs are being lost, he should also
provide a boost for Scotland’s construction sector, by applying a
permanent reduced VAT rate of five per cent for Registered
Social Landlords repairing and maintaining their housing stock.

“We also want the Chancellor to bring forward the reduction in

the waiting period before ISMI can be claimed by home owners
who have lost their jobs, and the increase to the total mortgage
value on which ISMI is payable.

“This combination of measures would lay the foundations for a

revival in the fortunes of a hard-pressed housing market. It
would also help Scottish homeowners feeling the financial
pressure of the economic downturn.”

NOTES FOR NEWS EDITORS

1. The UK Government has scope through a European

Union VAT Directive to apply a reduced VAT rate until 2010 for
repairs and renovations as a measure to help employment and
reduce tax evasion in a labour-intensive industry. It has chosen
not to do so, although it applies in the Isle of Man.

2. Some people may qualify for Income Support for

Mortgage Interest, which pays the interest on a mortgage up to
100,000 pounds after 39 weeks.

The UK Government has already announced the decision to

shorten the waiting period (on a temporary basis) to 13 weeks
before ISMI can be claimed by homeowners and also that
interest will in future be covered on mortgages up to 175,000
pounds (up from the current 100,000 pounds limit) to ensure that
ISMI support reflects average house prices in the UK.

The Scottish Government previously pressed for such changes

and is now pushing for this help to start from January 2009.

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 3. Where investors buy more than one property they are
charged Stamp Duty Land Tax (SDLT) on the overall transaction
value of the purchase and not on the individual unit price of each
property. This means they are charged at a rate of four per cent,
where the transaction value exceeds 500,000 pounds. This can
put investors at a disadvantage compared to individual property
purchases that are charged SDLT at one per cent if the unit
value is between 175,000 pounds and 250,000 pounds.

4. Real Estate Investment Trusts (REITs) were intended to

provide a tax-efficient investment vehicle for commercial and
residential property. Since REITs were introduced by the UK
Government in January 2007, a number of commercial property
companies have converted to REIT status. However, there are
currently no REITs based on residential property. Organisations
like the Scottish Property Federation cite problems with the rules
governing residential REITs making these vehicles unattractive
to investors who may be seeking a long term, stable return from
the housing market.

Contact: Iain Monk: 0131 244 2951 or 07771 555 601

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www.scotland.gov.uk