These FAQs should be used as a basic introduction to the Supplement.  More detailed information is available in the Legislative Guidance to help taxpayers and their agents understand whether or not their particular transaction is subject to the supplement.  

2.01 Making a return

Q: I live in the family home in Edinburgh and I want to buy another property to use as a buy-to-let.  I know that I will have to pay extra tax for this additional property but I am unsure how this works.  Do I just make one LBTT return and one payment or is there a separate return and payment required for the extra tax?

A: Only one LBTT return and payment is required. The structure of the LBTT return will be changed to capture information about the Additional Dwelling Supplement where it is payable.The process of making a LBTT return and paying tax will remain the same.

2.02 Effective Date

Q: I own a house that I live in Glasgow and I am planning on buying a flat to rent out.  I will be the sole owner of this property. I am aware that the Additional Dwelling Supplement will have to be paid on this purchase if the effective date of the transaction is after 1 April, 2016.    I am unsure, however, what is meant by "effective date of transaction".

A: The date at which the liability for payment of LBTT arises is known as the effective date of the transaction. In the majority of cases, the effective date of a land transaction is the date that the land transaction is completed (or the date of settlement).

In a standard house purchase, the date of settlement is the date that the purchase price is paid by the buyer in exchange for the seller delivering the keys and disposition.

There will be circumstances, however, where the effective date of a transaction is not the date that that transaction is completed. Further guidance relating to such circumstances can be found in here.

2.03 Transitional arrangements

Q: I am buying a holiday home in Skye. I already own the house that I live in in Falkirk and I do not plan to sell that house.  The effective date of my new purchase will be the 3rd of April, 2016.  Does this mean I will have to pay the Additional Dwelling Supplement?

A: If you entered into your contract to buy the holiday home on or after 28 January, 2016, and the effective date of the transaction is on or after 1 April, 2016, the Additional Dwelling Supplement will apply.

However, transitional provisions apply.The Bill to introduce the Additional Dwelling Supplement was published on 28 January 2016. Therefore, if you entered into the contract before 28 January 2016 you will not be liable to pay the supplement, whatever the effective date is.

2.04 Sale of previous main residence takes place after the acquisition of next main residence

Q: I am buying my next house which will be my main residence. I am selling my existing main residence but the contract for sale will not go through until after my new purchase is completed. As I am selling one property and buying another, will the Additional Dwelling Supplement apply?

A: Yes. When you purchase your new house, because you will not have sold your existing main residence, you will own two houses. You will therefore have to pay the Additional Dwelling Supplement on the purchase of your next house.

However, on 2 March 2016, the Scottish Parliament's Finance Committee agreed to amend the Bill at stage 2 of the Bill process to allow for the situation where the buyer purchases their new main residence before they sell their old one. In such a situation, if the sale of the previous main residence takes place before the tax return for the purchase of the next main residence is made, no Additional Dwelling Supplement is due.

If you have already submitted a return for the purchase transaction, you will, be eligible to make a claim for the repayment of the Additional Dwelling Supplement you paid once your previous house is sold, provided that completion takes place within 18 months of the purchase of your next home. Example 2.05 explains how to claim a repayment of the Additional Dwelling Supplement.

2.05 Claiming a repayment of the Additional Dwelling Supplement

Q: I bought a new home to live in as my main residence but was unable to sell my previous home before that purchase so I paid the Additional Dwelling Supplement.  My previous home has now sold.  Can I reclaim my payment of the Additional Dwelling Supplement now that my previous main residence has sold?

A: If your previous main residence was sold within 18 months of the day after the effective date of the acquisition of your next home, you can reclaim the Additional Dwelling Supplement that you paid.

If you make your claim within 12 months of the filing date of the original land transaction return then you can claim a repayment by amending the original return.This can either be done online or by writing to us.If you make your claim later than 12 months after the filing of the original land transaction return, you can do so by following our guidance for claiming a repayment of tax (see RSTP7003).

2.06 Acquiring next main residence; choosing to rent out previous main residence

Q: I own the home that I live in and am planning to move into a bigger house.  I am having difficulty selling my existing house so have decided to keep it and rent it out.  The next house I am purchasing will be my next main residence, not a buy-to-let investment or a second home, so will the Additional Dwelling Supplement be payable on the purchase of my new house?

A: Yes. Additional Dwelling Supplement will be due on the purchase of your new house.

This is because when the purchase of your new house is settled, you will own 2 or more dwellings and you are not treated as having replaced your main residence because you have not sold (and in this example do not intend to sell) your previous main residence.

Someone who owns 2 or more dwellings who has not sold an existing main residence pay the Additional Dwelling Supplement on the purchase price of their second property purchased, irrespective of whether the second property is a buy-to-let property or a main residence, as in this example.

2.07 Replacing main residence, already own a buy-to-let property

Q: I am in the process of selling my main residence and I already own a buy-to-let property.  I plan to buy a property that will become my next main residence.  Will the Additional Dwelling Supplement be due?

A: Provided that you complete the sale of your current main residence on or before the effective date of acquisition of your next main residence, the Additional Dwelling Supplement will not apply to the purchase of the next main residence even though after settlement of this transaction you will own 2 dwellings. However, if you still own your previous main residence at the end of the effective date of acquisition of your next main residence you will have to pay the Additional Dwelling Supplement although you may be able to claim repayment of the supplement paid after you sell your previous main residence - see example 2.05.

2.08 Acquisition of first property for buy-to-let

Q: I plan to buy my first property and to use it as a buy-to-let while I stay with my parents. I've been told that buy-to-let properties incur an Additional Dwelling Supplement of 3%.  Is this correct?

A: In your case, no.The Additional Dwelling Supplement applies only where someone owns two or more properties when they buy a home.As you will own only one property, the Additional Dwelling Supplement will not apply, irrespective of what you plan to use the property for.

2.09 Next main residence needs refurbishment after acquisition; need to retain existing main residence until the next one is available

Q: I am buying a new family home which will need a lot of work done to it before we can move in.  As a result, I will need to sell the existing family home some months after the new purchase.  Will the Additional Dwelling Supplement apply and, if so, will I only need to pay the Additional Dwelling Supplement when I move in? 

A: Yes, the Additional Dwelling Supplement will apply. As you will own two houses and will not have yet sold your previous main residence, the Additional Dwelling Supplement will apply to the purchase of your next main residence. The Additional Dwelling Supplement must be paid within 30 days of the purchase of your next main residence completing.The date that LBTT is due is not related to your move in date.

You will, however, be eligible for claim a repayment of the Additional Dwelling Supplement you paid when you sell your previous main residence, provided that the sale is completed within 18 months of the purchase of your next main residence (See example 2.05).

2.10 Properties worth less than £40,000

Q: I own and live in a house and I have now decided to buy a flat valued at £35,000, which I will rent out.  As I will own two properties, one of which is a buy-to-let, will this mean that the Additional Dwelling Supplement will apply to my new purchase?

A: No.Any property acquired for less than £40,000 is not subject to the Additional Dwelling Supplement.This means that you will not pay the Additional Dwelling Supplement on your purchase of the flat.

2.11 Property owned elsewhere in the UK, additional home purchased in Scotland

Q: I have relocated my family to Scotland from England for work purposes.  I have bought a home in Scotland which will be my new main residence.  However, due to the “chain” breaking down on the sale of my former main residence in England I currently own two residential properties.  Do I have to pay the Additional Dwelling Supplement?

A: Yes.As you will own two houses and will not have yet sold your previous main residence, the Additional Dwelling Supplement will apply to the purchase of your next main residence (assuming the market value of both homes is at least £40,000 at the effective date).

However if you are able to sell your former main residence within 18 months from the date of settlement of the transaction to purchase a residential property in Scotland then a repayment of tax paid in relation to the Additional Dwelling Supplement may be claimed (See example 2.05).

2.12 Property owned overseas, additional home purchased in Scotland

Q: I own a residential property in Spain and after 1 April 2016 will buy a second home in Scotland.  Will the Additional Dwelling Supplement apply?

A: If the purchase price of the additional home bought in Scotland is £40,000 or more (and the market value of the property in Spain is £40,000 or more at the effective date of the purchase of your second home) then the Additional Dwelling Supplement will apply.

All dwellings already owned anywhere in the world which have a market value of at least £40,000 at the effective date are taken into account when considering whether the Additional Dwelling Supplement applies to the purchase of a dwelling in Scotland.

2.13 Residential property owned overseas and retained as a rental property, additional home purchased in Scotland as a main residence

Q: I own a residential property in Berlin and I rent another in that city that I use as my main residence.  I want to move back to Scotland and buy a house to live in, while keeping the Berlin property as a rental property. How will the Additional Dwelling Supplement affect me?

A: As you will own two dwellings, one in Scotland and one in Germany, and you are not replacing your main residence, the Additional Dwelling Supplement will apply to the purchase of your home in Scotland (unless the property in Berlin has a market value of less than £40,000 at the effective date of the transaction of the purchase of your Scottish residence).

2.14 Acquisition of residential and non-residential property

Q: I own a residential property which is my main residence.  I plan to buy a shop with a flat above and I will pay non-residential rates on the whole of the consideration paid.  I intend to rent the flat out – will the Additional Dwelling Supplement apply?

A: Yes. You will be liable for the Additional Dwelling Supplement on the proposed transaction but only on the amount of the purchase price relating to the residential element (i.e. flat) of the transaction and only if this figure is £40,000 or more.

The purchase price of the shop and flat will need to be apportioned on a just and reasonable basis, with the Additional Dwelling Supplement payable on the proportion of the purchase price apportioned to the residential element of the transaction.

The total LBTT payable will be the sum of the tax due on the transaction usingnon-residential rates plus the Additional Dwelling Supplement on the proportion of the purchase price attributed to the acquisition of the flat.

2.15 Portfolio owner acquires main residence

Q: I live with my parents but I own two flats which I rent out.  I'm thinking of moving out and buying a flat of my own to live in.  Will the Additional Dwelling Supplement apply to my purchase?

A: Yes. As you already own two properties and are buying a third and not selling a main residence, the Additional Dwelling Supplement will apply unless the market value of the new flat or both of the flats which you already own are each less than £40,000.

2.16 Portfolio owner replaces main residence

Q: I own five flats which I rent out.  I also own a house which I live in but I am thinking about selling this and moving into a bigger house.  I have heard that if I own more than one property, I will have to pay additional tax on any other properties that I buy. Is this true?

A: Whether you will have to pay the Additional Dwelling Supplement will depend on which type of property you buy.

If you buy a new main residence and sell the old one at the same time or before you buy the new one, then the Additional Dwelling Supplement will not apply as, although you will own more than one property, you are selling an old main residence and replacing it with a new one.

However, if you buy another flat to rent out, because you will not be selling an old main residence, the supplement will apply.

2.17 Portfolio owner acquires next main residence having sold previous residence

Q: 12 months ago, I sold my house and left Scotland to travel the world.  I bought three flats in Scotland to provide rental income to fund my travels.  I have now returned to Scotland and I am looking to buy a new house to live in.  As I am not selling the three flats, I will own four properties.  Does this mean that the Additional Dwelling Supplement will apply?

A: No. Although you will own four properties when your new purchase completes, as you have sold your previous main residence within the previous 18 months and are buying your next main residence, the supplement will not apply to the purchase of your next main residence.

As long as you have sold your main residence within the previous 18 months and are buying your next main residence, the supplement will not apply to the purchase of the next main residence.

 

Last updated: 
22 May 2017

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