Monday, 22 May 2017
Additional Dwelling Supplement
In April 2016 the Scottish Government introduced an additional Land and Buildings Transaction Tax liability for those purchasing a second property. The Additional Dwelling Supplement (ADS) is an additional 3% levy charged on the full purchase price of the property. This is payable in addition to the Land and Buildings Transaction Tax that is payable on the purchase of any residential property in Scotland when the purchase price exceeds £145,000.
ADS is payable by those purchasing a second property without first selling their main residence. A ‘main residence’ is the property a person deems their home, spends most of their time and uses as their correspondence address. Importantly, ADS will not apply to those selling their current main residence and purchasing a new main residence on the same day. Those choosing to purchase a second home in Scotland will still be required to pay ADS on this purchase where their main residence is located out with Scotland.
The legislation governing the application of ADS deems married and co-habiting couples as one, therefore property owned by one is deemed to be owned by both for the purpose of this tax. Consequently, if the main residence is owned by one partner and the couple look to buy a second property jointly, ADS would apply and be payable in respect of the full purchase price.
If a second main residence is purchased prior to the sale of the existing main residence taking place, ADS will be payable on this purchase. The ADS payment can, however, be reclaimed if the sale of the first main residence takes place within 18 months of the date of the purchase.
ADS applies to all purchases of residential property by a company. There are, however, reliefs available where corporate entities purchase 6 or more properties in one transaction.
Instances where the Additional Dwelling Supplement will not apply: