Following a request from the Scottish Government, the Scottish Land Commission recently published their report on research into potential options for the introduction of a land value tax (LVT).

LVT (not to be confused with Land Value Capture Tax, a mechanism designed to tax the increase in value of land at the point of development approval, on which we have written about here and here) is most usually seen as an alternative (or addition to) the current system of Council Tax. It is of interest to the Scottish Government and Land Commission given its dual potential of reforming property taxation and securing land reform through more diversified land use and ownership. The underlying thinking is that LVT may tax land not otherwise taxed, and thereby encourage sale or development by the landowner.


LVT is a recurrent tax charged on landowners based on unimproved land value and usually calculated as a percentage of that value. The report identifies various challenges, including how to collect tax from a land owner who is asset rich but cash poor; how to determine the unimproved value of land which is presently in an improved state, and issues over the requirement to revalue land over time. Such issues affect all jurisdictions which look to implement LVTs.

Some specific issues from a Scottish perspective include how to identify accurately who owns the land, in the absence of comprehensive registration of title in the plan-based Land Register; and problems around valuation of land arising from the Scottish plan-based planning system. The report notes that successful LVTs tend to be in places where a zoning system (allocating permitted use by area and conveying automatic development rights to landowners) is used by planners, as such a system allows easier assessment of value of land in the relevant zone, as compared to valuing land where approvals are discretionary, such as in Scotland at present.


The report noted that in the various examples of LVT considered, there were widespread exemptions, and there is therefore wide scope for jurisdictions to tailor an LVT to their specific circumstances. The report notes that it is not a foregone conclusion that agricultural land would be exempt from an LVT and that will bring with it concern to farmers anxious to ensure that their farms are not broken up. One would hope that avoiding such a scenario would be a significant policy consideration for the future.


At this stage, the report was commissioned as a backdrop to future policy decisions. The report sets out various potential options for introducing an LVT, including as a replacement for Council Tax/Rates or in addition to those. It also notes that simple reform or extension of existing land taxes could lead to a more progressive and equitable tax system.

With the recently passed 2019 Scottish Budget now committing the Scottish Government to cross-party talks on replacing the current Council Tax, we may have an LVT on the table for discussion earlier than expected and we will keep developments on this front under review.


Leigh Gould