LBTT10016 - Transactions by individuals
The ADS will only apply where a buyer (or any one individual in a group of buyers) owns two or more dwellings at the end of the day that is the effective date of a transaction and is not replacing their only or main residence.
The ADS will never apply if, at the end of the day that is the effective date of the transaction, a buyer (or group of buyers) owns or are deemed to own only one dwelling, unless that dwelling is acquired in the course of a business, the sole or main activity of which is investing or dealing in property.
The first dwelling can be a buy-to-let dwelling. The ADS will not apply where an individual purchases a first buy-to-let dwelling and that individual:
- does not own any other existing dwelling at the end of the effective date of the transaction and
- is not acting either as a sole trader or in a partnership of which that individual is a partner, in the course of a business where the sole or main activity is investing or dealing in property.
Full relief is available from the ADS for any transaction in which a buyer (or group of buyers) purchases six or more residential properties in one transaction.
Where an individual jointly owns a property and at a later date acquires a further share of that property, we consider that ADS will not apply to these additional transactions. However, the additional transactions may still be notifiable and chargeable to LBTT (without ADS) if any consideration is paid, or debt assumed. Our guidance at LBTT2003 - Debt as consideration should be consulted in such cases.
Where an individual owns more than one dwelling and they are replacing their only or main residence but the transaction also includes the acquisition of another property as well as the one they intend to occupy as their only or main residence, the ADS will be due. Where this applies, the chargeable consideration subject to the ADS excludes, on a just and reasonable basis, the amount attributable to the acquisition of the property for which they intend to use as their only or main residence. It follows that if a repayment is sought, the repayment will only be in relation to the amount of ADS which was paid in the first instance.
Examples
In May, Green sells their previous main residence (PMR) (House 1) and purchases their new main residence (NMR), which comprises of a house (House 2) with a separate holiday cottage (House 3).
At the end of the effective date, Green has replaced their PMR (House 1), but they have purchased one dwelling (House 3) in addition to the one that they intend to occupy as their NMR (House 2). The ADS will be payable, but this will only be based on the consideration paid for the additional dwelling (House 3) and will not include the consideration attributed to House 2.
Purple and Blue live together in their main residence which they own jointly in equal shares. They also own jointly a holiday home. The main residence is subject to a mortgage for which Purple and Blue are each liable for a one half share. Blue wants to transfer their half share of their main residence to Purple, who will become solely liable to repay the mortgage.
The chargeable consideration will be based on the value of the existing mortgage plus any cash sums paid. The existing mortgage on the dwelling is £320,000. As no cash is being paid, the chargeable consideration will therefore be a half share of the existing mortgage, £160,000.
LBTT will apply on the value of the half share of £160,000. As Purple already owns a share of the dwelling, the ADS will not apply.
Red and Green are married and live together in their main residence (House 1), which is jointly owned. In July, they separate and Red leaves House 1. Red buys their own property (House 2). Red will have to pay ADS on this property, as they own two dwellings at the end of the effective date. House 1 has not been replaced. Note: Red will only be able to claim a repayment of the ADS paid if House 1 sells within 36 months or they transfer their share in House 1 within 36 months.
Notes: Due to a change in the legislation with effect from 1 April 2024
- For transactions up to and including 31 March 2024 the 36 months period is 18 months.
- For transactions with an effective date on or after 1 April 2024.
If there had been a court order in connection with a divorce where Red had to remain in ownership of House 1, the house would be disregarded in the number of dwellings owned by Red. Therefore, no ADS would be due.
LBTT10017 - Transactions by non-individuals
A non-individual is not regarded as replacing their only or main residence. The ADS will therefore apply to every purchase of a dwelling in Scotland by a non-individual other than certain trust transactions.
The ADS will also apply to all purchases by an individual, acting either as a sole trader or in a partnership of which that individual is a partner, in the course of a business the sole or main activity of which is investing or dealing in property.
Non-individuals are non-natural persons, such as companies, investment trusts or any other corporate entity.
The ADS applies to chargeable transactions by non-individuals if they meet the following conditions:
- the transaction consists of or includes the purchase or ownership of a dwelling in Scotland,
- the chargeable consideration for the transaction is £40,000 or more,
- the buyer is not an individual or,
- the buyer is an individual and either of the following applies:
1. The purchase is made in the course of a business of the individual where the individual is acting either as a sole trader or as a partner in a partnership where the sole or main activity of the business is investing or dealing in chargeable interests. Chargeable interests includes any interest which would be a chargeable interest but for the fact that it relates to land out with Scotland.
2. The individual is making the purchase as trustee under a settlement where there is no interested beneficiary for the dwelling.
Note: a beneficiary under the settlement is an interested beneficiary in relation to a dwelling if the beneficiary has or will have a relevant interest in the dwelling. A relevant interest means they are entitled to occupy the dwelling for life or entitled to income in respect of the dwelling.
Full relief is available from the ADS for any transaction in which a buyer purchases six or more residential purchases in one transaction.
Examples
Orange Limited currently operate out of rented premises. The company decides to purchase a dwelling to generate buy-to-let income.
At the end of the effective date, the company owns only one dwelling. However, as long as the relevant consideration for the transaction is £40,000 or more, each purchase of a dwelling that a company makes is subject to the ADS, even though there are no previously owned properties.
Therefore, the ADS will apply.
Orange Limited currently operate out of rented premises. The company decides to purchase a dwelling to generate buy-to-let income jointly with Blue. Blue does not own any properties. At the end of the effective date, the company owns only one dwelling.
However, as long as the relevant consideration for the transaction is £40,000 or more, each purchase of a dwelling that a company makes is subject to the ADS, even though there are no previously owned properties.
Therefore, the ADS will apply. Despite not already owning property, Blue would be jointly responsible for paying the ADS as they are jointly buying property with a company, for which the ADS will always apply.
LBTT10061 - Transactions involving joint buyers
Joint buyer rules apply to two or more buyers purchasing a dwelling. There are many scenarios where two or more people purchase a dwelling together. The term joint buyers is not restricted to couples.
Where two or more buyers each have a share of the ownership of a dwelling, each buyer who is jointly entitled is deemed to be the owner the dwelling. It does not matter the size of the share. Equally, where two or more buyers are entitled/have a right to the ownership of a dwelling but have not taken title to that dwelling, each buyer who is jointly entitled to the ownership of the dwelling is deemed to be the owner of the dwelling. For example, if siblings were to inherit equal shares in the ownership of a dwelling, each sibling would be treated as the owner of the dwelling.
This means each joint buyer is classed as the buyer in a property transaction.
Where one or more joint buyers owns more than one dwelling at the end of the day that is the effective date, the ADS will apply. Unless the main residence of each joint buyer who owns more than one dwelling is being replaced.
In other words, where there are joint buyers of a dwelling and either or both own an existing main residence, unless both of the joint buyers have sold their previous main residence before (or on the effective date) they acquire the new dwelling, the ADS will apply.
Where one of the joint buyers in a transaction to purchase a dwelling is a non-individual, the ADS will automatically apply to every residential transaction (other than certain trust transactions as detailed in part LBTT10063 of the guidance) and the position relating to the replacement of a previous main residence will not apply.
The ADS will not apply to transactions where a person (whether an individual or a non-individual) is acquiring a further part of a property which they already jointly own. Note that the transaction may still be notifiable and chargeable to LBTT (without ADS) if any consideration is paid, or debt assumed.
SSI Order 2024
For transactions with an effective date on or after 1 April 2024
If a buyer owns a share valued at less than £40,000, the dwelling will not count towards the number of dwellings owned.
Repayment conditions within legislation have been changed for joint buyers only one of the buyers are required to meet repayment conditions:
a) within the period of 36 months beginning with or ending with the day after the effective date of the transaction, the buyer or, where there are two or more buyers who are or will be jointly entitled to the interest acquired, one of the buyers disposes of the ownership of a dwelling (other than one that was or formed part of the subject-matter of the chargeable transaction) (one buyer)
b) that dwelling was the buyer’s or where there are two or more buyers who are or will be jointly entitled to the interest acquired, one of the buyer’s only or main residence at any time during the period of 36 months ending with the effective date of the transaction, and (one buyer)
All buyers are required to meet the following repayment condition:
c) the dwelling that was or formed part of the subject-matter of the transaction has been occupied as the buyer's only or main residence. (all buyers)
Additional condition:
d) where there are two or more buyers who are or will be jointly entitled to the interest acquired, each of whom own a dwelling or dwellings other than the subject-matter of the transaction, all of the buyers must meet the conditions a), b) and c). (all buyers)
Therefore, for joint buyers where a further property is owned by the second or subsequent buyer a repayment of the ADS is not applicable unless all buyers have replaced a previous main residence.
For further guidance see: LBTT(S)A 2013 Schedule 2A – Paragraphs 5 & 17.
Examples
Blue and Orange are purchasing a dwelling together (House 2). This will be Blue's first dwelling, but Orange already owns another dwelling (House 1) that they do not intend to sell.
For Orange, House 2 will be an additional dwelling.
At the end of the effective date of the transaction, Orange owns two dwellings and has not replaced a previous main residence (PMR) (House 1). The ADS will apply. Blue and Orange are joint buyers and, therefore, it does not matter that Blue does not own any other dwelling as Blue is treated as satisfying the conditions of the ADS rules if Orange does.
Purple and Pink are purchasing a dwelling together (House 3).
Both Purple and Pink currently own a dwelling, and each use their own dwelling as their main residence, separately (House 1 and 2, respectively). Purple is selling their main residence on the effective date, but Pink is not.
For Pink, the new purchase will be an additional dwelling. At the end of the day that is the effective date of the transaction for House 3, Pink will own two dwellings and has not replaced a previous main residence (PMR), so the ADS will apply.
The fact that Purple has sold their PMR does not matter. Purple and Pink are joint buyers, and if one of them satisfies the conditions for the ADS to apply, they both will.
Note: Change to legislation with effect from 1 April 2024
If Pink subsequently sells their PMR (House 2) within the 36-month period, the ADS can be reclaimed as only one buyer is required to meet condition a) and condition b) and both buyers meet condition c). The conditions are met as Pink sells House 2 within 36 months of the effective date. Both Purple and Pink are living in House 3 as their new main residence meeting repayment condition c). As no dwellings are owned apart from House 3, a repayment claim for the ADS can be made.
For transactions up to and including 31 March 2024, the legislative change is not retrospective. The example would be as follows:
Purple and Pink are purchasing a dwelling together (House 3).
Both Purple and Pink currently own a dwelling and each use their own dwelling as their main residence, separately (House 1 and 2, respectively). Purple is selling their main residence on the effective date, but Pink is not.
For Pink, the new purchase will be an additional dwelling. At the end of the day that is the effective date of the transaction for House 3, Pink will own two dwellings and has not replaced a PMR, so the ADS will apply.
The fact that Purple has sold their PMR does not matter. Purple and Pink are joint buyers, and if one of them satisfies the conditions for the ADS to apply, they both will.
Note: if Pink subsequently sells their PMR (House 2) within the 18 month period, the ADS could not be reclaimed as both individuals did not occupy House 2 as their PMR.
Note - change for transactions from 1 April 2024
Red owns their current main residence (House 1) but will soon be buying a new main residence (NMR) with Green jointly. They are not co-habitants, spouses or civil partners. Green currently lives in separate rented accommodation. Red cannot sell their main residence (MR) before the joint purchase takes place.
Therefore, at the end of the effective date of the transaction, Red owns two dwellings and has not replaced their PMR. If any of the joint buyers own more than one dwelling and have not replaced an only or main residence, the ADS will apply.
Red sells their PMR 5 months later and they now wish to claim a repayment of the ADS. Repayment conditions as of 1 April 2024 for transactions on or after that date, state only one of the buyers needs to meet repayment conditions a) and b). Both however must meet condition c).
Therefore, as Red has sold a PMR within 36 months of the effective date conditions a) and b) have been met, Red and Green are both living in the new main residence which meets repayment condition c). A repayment claim can be made for the ADS.
For transactions up to and including 31 March 2024 the example would be as follows:
Red owns their current main residence (House 1), but will soon be buying a NMR with Green jointly. They are not co-habitants, spouses or civil partners. Green currently lives in separate rented accommodation. Red cannot sell their MR before the joint purchase takes place. Therefore, at the end of the effective date of the transaction, Red owns two dwellings and has not replaced their PMR. If any of the joint buyers own more than one dwelling and have not replaced an only or main residence, the ADS will apply.
Therefore, the ADS will apply. Red sells their PMR 5 months later and they now wish to claim a repayment of the ADS. Section 48 of the LBTT(S)A states that anything required or authorised to be done in relation to the buyer must be done by or in relation to all of them. Therefore, each buyer needs to have met the conditions at Paragraph 8 for a repayment to be made. Although Red meets the repayment conditions, Green does not and so a repayment cannot be made.
Green and Blue each own a dwelling which is their main residence (MR) separately. In May, they decide to buy a property jointly to use as their new main residence (NMR) together (House 3). They do not intend to sell their PMRs.
At the end of the effective date, they are both deemed to own three dwellings and neither will have replaced their PMR, so the ADS will apply. In October, Green then sells their PMR. Green has, within a period of 18 months, disposed of their ownership of a dwelling.
However, although that dwelling was their PMR and House 3 has been used as the NMR, the conditions have not yet been met by both Green and Blue, so the ADS cannot be repaid. The following February, Blue then sells their PMR. At this point, both Green and Blue each meet the conditions to make them eligible for a repayment of the ADS.
LBTT10062 - Transactions involving spouses/civil partners/cohabitants and their dependant children
Married couples, those in a civil partnership and cohabitants (those living together as though married), along with their dependant children (children under 16, including adopted children), are treated as one economic unit for the purposes of determining how many properties a buyer owns at the end of the day that is the effective date of the transaction.
Equally, where a buyer's spouse, civil partner, cohabitant or a dependant child is entitled/has a right to the ownership of a dwelling but has not taken title to that dwelling, that buyer will be deemed to be the owner of that dwelling. For example, if a buyer's spouse were to inherit the ownership of a dwelling, that buyer would be treated as the owner of the dwelling.
This section does not apply if the buyer and their spouse or civil partner have separated. They have separated if they no longer live together and they do not intend to live together again.
The ADS will apply where one spouse/civil partner/co-habitant owns the existing shared home and the other spouse/civil partner/co-habitant purchases an additional dwelling. The ADS would be chargeable on the additional purchase, meaning the LBTT liability would be the same whether they jointly own the existing shared home or not and then jointly or individually buy an additional dwelling.
For transactions with an effective date on or after 1 April 2024
There is an exception if a buyer meets the following conditions:
- owns two dwellings at the end of the effective date
- the first dwelling was at any time their previous main residence, with a spouse, civil partner, former spouse, or former civil partner
- the first dwelling remains the main residence of the buyer’s spouse, civil partner, former spouse, or former civil partner
- there is no intention to live together again as civil partner or spouse
- the ownership retained in the first dwelling is due to a court order or formal agreement in connection with:
- dissolution or annulment of the civil partnership
- Separation or divorce
In such cases the purchase of a second dwelling is exempt from the ADS.
The ADS will also apply to the purchase by an individual who does not own an existing dwelling but who has a spouse, civil partner, cohabitant, dependant child or dependant child of their spouse, civil partner or cohabitant who does own an existing dwelling.
The inclusion of children under 16 within the meaning of "buyer" for the purposes of the LBTT(S)A 2013 reflects the fact that such a child's ownership of residential property is practically the responsibility of their parent(s), and is an anti-avoidance measure to disincentivise avoidance of the ADS by artificially registering title in a child's name.
Spouses, cohabitants and civil partners
The SSI Order 2017 made amendments to the ADS legislation in connection with spouses, cohabitants and civil partners. The amendments came in to force on 30 June 2017 and provide relief from the ADS where spouses, civil partners and cohabitants jointly buy a new main residence but the previous main residence they are replacing is owned by only one of them.
The Land and Buildings Transaction Tax (Relief from Additional Amount) (Scotland) Act 2018 made the changes introduced by the 2017 Order retrospective. This means that eligible transactions where the contract was entered into on or after 28 January 2016, and where the effective date of the transaction is on or after 1 April 2016, will now be able to claim a relief/repayment.
Paragraph 9A provides relief from the ADS in certain circumstances when two buyers jointly buy a new dwelling and currently live together as a married couple, civil partners or cohabitants in a dwelling owned by either one of them solely.
Prior to the SSI order 2017 any transactions:
- where spouses or cohabitants jointly bought a dwelling, and
- prior to the purchase they sold a dwelling that they both lived in but was owned by only one of them, and
- at the effective date of the new joint purchase either buyer owned or was deemed to own a further dwelling,
then the ADS would apply to the purchase because both buyers were not replacing their main residence, as the previous main residence was owned by only one of them.
However, the SSI Order 2017 introduces relief that means in circumstances where only one buyer has disposed of their ownership of a dwelling, the joint purchase made by the buyers would not attract the ADS if the property sold was the only or main residence of both the joint buyers and they both intend to live in the new property as their only or main residence.
Paragraph 8A
Paragraph 8A is in connection with repayment of the ADS paid on transactions where the joint buyers are spouses, civil partners or cohabitants where only one buyer owned their previous main residence and they sold that previous main residence.
Prior to the SSI Order 2017:
- where spouses, civil partners or cohabitants jointly bought a dwelling, and
- after that purchase, but within 18 months of it, they sold their previous main residence, and
- that previous main residence was owned by one of them only,
then the ADS would be payable on the purchase and the buyers would not be able to reclaim the ADS paid because they were not both replacing their main residence.
However under paragraph 8A, the ADS will still be due and payable (because at the end of the day on which the purchase is made one of the buyers owns more than one dwelling) but when the previous main residence is sold (within 18 months of the purchase), the buyers will be able to reclaim the ADS paid if the dwelling sold was the main residence of both joint buyers and they have both been occupying the new property as their only or main residence.
For further guidance see: LBTT10020 - How to determine if an ‘only or main residence’ is being replaced
SS1 2024
For transactions with an effective date on or after 1 April 2024
Paragraph 8 has been updated to reflect the following:
For joint buyers including spouses, civil partners, and cohabitants only one of the buyers are required to meet repayment conditions:
a) within the period of 36 months beginning with or ending with the day after the effective date of the transaction, the buyer or, where there are two or more buyers who are or will be jointly entitled to the interest acquired, one of the buyers disposes of the ownership of a dwelling (other than one that was or formed part of the subject-matter of the chargeable transaction)
b) that dwelling was the buyer’s or where there are two or more buyers who are or will be jointly entitled to the interest acquired, one of the buyer’s only or main residence at any time during the period of 36 months ending with the effective date of the transaction, and
All buyers are required to meet the following repayment condition:
c) the dwelling that was or formed part of the subject-matter of the transaction has been occupied as the buyer's only or main residence.
Additional condition:
d) where there are two or more buyers who are or will be jointly entitled to the interest acquired, each of whom own a dwelling or dwellings other than the subject-matter of the transaction, all of the buyers must meet the conditions.
Therefore, for joint buyers where a further property is owned by the second or subsequent buyer a repayment of the ADS is not applicable unless all buyers have replaced a previous main residence.
Examples
Green and Red are married. Green owns a dwelling (House 1), which they purchased on their own prior to their marriage, where the couple now live as their MR. In December, Red decides to purchase a buy-to-let dwelling.
At the end of the day that is the effective date of the transaction, Red owns two dwellings as Red is the owner of the newly purchased buy-to-let dwelling and is deemed to be the owner of their spouse's existing dwelling. They are not replacing their PMR (House 1) and so the ADS will apply. Note: the economic unit provisions (Paragraph 6) apply equally to spouses, civil partners, cohabitants and children under the age of 16. However, they do not apply to couples who no longer live together and do not intend to live together again (separated couples).
Red and Green are married and live together in their main residence (House 1), which is jointly owned. In July, they separate and Red leaves House 1. Red buys their own property (House 2). Red will have to pay ADS on this property, as they own two dwellings at the end of the effective date. House 1 has not been replaced. Note: Red will only be able to claim a repayment of the ADS paid if House 1 sells within 18 months or they transfer their share in House 1 within 18 months.
Note: Changes in legislation with effect from 1 April 2024 for transactions with an effective date on or after 1 April 2024.
- The 18-month period becomes 36 months.
- If there had been a court order in connection with a divorce where Red had to remain in ownership of House 1, the house would be disregarded in the number of dwellings owned by Red. Therefore, no ADS would be due.
Red and Green live together in their main residence (House 1), solely owned by Red. In July, they decide to jointly purchase a property (House 2) which will replace their PMR.
However, the sale does not go through on time and at the end of the effective date, Red will own two dwellings (and Green will be deemed to own two dwellings). The ADS will apply as they own more than one dwelling and have not replaced their PMR. Six months later, the PMR sells.
A repayment of the ADS can be claimed as one of the buyers has replaced a dwelling that they owned within an 18 month periodfor transactions with an effective date up to and including 31 March 2024, or a 36-month period for transactions with an effective date on or after 1 April 2024. Both buyers lived in the PMR as their main residence and both intend to live in the NMR as their only or main residence.
Note: This would also be the case if Green had never lived in House 1, due to the legislative changes to repayment conditions with effect from 1 April 2024. Only one buyer if there are more than one, is required to meet repayment conditions a) and b), if the effective date of the transaction is on or after 1 April 2024, this is subject to only one dwelling bringing the transaction into ADS liability, per condition d).
Purple owns their current main residence (House 1), but will soon be buying a new main residence (NMR) with their civil partner, Blue. Blue currently lives in separate rented accommodation. Purple cannot sell their main residence (MR) before the joint purchase takes place in August.
Therefore, at the end of the effective date of the transaction, Purple owns two dwellings and has not replaced their PMR. Therefore, the ADS will apply. Blue is also deemed to own two dwellings by virtue of the joint buyer rules.
Purple sells their PMR five months later and they now wish to claim a repayment of the ADS paid. Although a PMR has been replaced, both buyers did not occupy House 1 as their PMR, so the repayment conditions have not been met and a repayment cannot be claimed.
Note: the same would apply if the joint buyers were not yet cohabitants, civil partners or spouses.
Since the change to repayment conditions with effect from 1 April 2024 for transactions with an effective date on or after 1 April 2024.
As Purple has sold their PMR they will meet repayment condition a) and b) and both Purple and Blue live in the NMR they meet repayment condition c), as no other dwellings brought the transition into ADS liability a repayment claim can be made.
Red and Green each own their current main residence separately (House 1 and House 2). They intend to buy a new main residence together as civil partners. Green sells their main residence prior to the effective date of the transaction. However, Red cannot sell their main residence (MR) before the joint purchase takes place.
Therefore, at the end of the effective date of the transaction, Red owns two dwellings and has not replaced their PMR. Therefore, the ADS will apply. Green is also deemed to own two dwellings by virtue of the economic unit provisions.
Red sells their PMR five months later and they now wish to claim a repayment of the ADS paid. Although a PMR has been replaced, both buyers did not occupy House 1 as their PMR, so the repayment conditions have not been met and a repayment cannot be claimed. The rules at Paragraph 8A(2) apply.
Since the change to repayment conditions with effect from 1 April 2024 for transactions with an effective date on or after 1 April 2024.
As Red has sold their PMR they will meet repayment condition a) and b) and both Red and Green live in the NMR they meet repayment condition c), a repayment claim can be made.
Blue and Red are married and live in a marital home solely owned by Red. Blue owns a separate dwelling which they let out to a third party. Blue and Red decide to sell Red’s property and jointly purchase a replacement main residence. Blue will own, and Red will be deemed to own, two dwellings at the effective date but only Red will have sold a main residence within the previous 36 months.
One of the buyers has sold a main residence in the 36 months before the effective date of the transaction. Both lived in that property as their main residence. As both also intend to live in the new dwelling as their main residence, the ADS will not apply.
This is because the purchase qualifies for relief under Schedule 2A, Paragraph 9A of the LBTT(S)A 2013.
Note: the 36-month period had been 18 months, this was the subject of a legislative change with effect from 1 April 2024, as the change was not retrospective any transaction with an effective date up to and including the 31 March 2024 has an applicable timescale of 18 months.
LBTT10063 - Transactions involving Trusts
Property is sometimes held in trust by trustees and, to ensure the fairness, integrity and consistency of the LBTT regime to all, the ADS will apply to certain purchases made by trusts.
Purchases by a trustee on behalf of a trust (that is not a bare trust) and where the beneficiaries have no relevant interest will always be liable for the ADS, irrespective of whether the trustees own an existing property or not. This means acquisition by such trustees are treated in the same way as acquisitions by non-individuals.
Bare Trusts
For the purposes of LBTT, the beneficiaries of bare trusts are treated as the buyer when a trustee or trustees on behalf of a trust purchases a property.
A bare trust is a trust under which the property is held by a person as trustee:
- for a person who is absolutely entitled as against the trustee, or who would be so entitled but for being under a legal disability by reason of non-age or under another disability, or
- for two or more persons who are or would be jointly so entitled, and
- includes a case in which a person holds property as nominee for another.
Absolutely entitled refers to a case where the person has the exclusive right, subject only to satisfying any outstanding charge, lien or other right of the trustee to resort to the property for payment of duty, taxes, costs or other outgoings, or to direct how the property is dealt with.
Where the buyer in a transaction to purchase a dwelling is the trustee of a bare trust, the beneficiary is treated by the LBTT(S)A 2013 as the buyer in that transaction for the purposes of determining whether the ADS will apply. Where title to a dwelling in such a transaction is taken by the trustee under a bare trust, the buyer of the dwelling is deemed to be the beneficiary under that trust. This is the case irrespective of whether the trustee registers the title in the Land Register or not.
Other Trusts
Where the buyer is the trustee of a settlement and the beneficiary under the settlement has a relevant interest in a dwelling that is or forms part of the trust property, the beneficiary is treated as the buyer.
A relevant interest in a dwelling that comprises or forms part of the trust property, in respect of a beneficiary under a settlement, exists where, under the terms of that settlement, the beneficiary is entitled to occupy the dwelling for life or income earned, whether net or gross, in respect of the dwelling.
Where title to a dwelling is taken by the trustee under such a settlement, and the beneficiary under that trust has a relevant interest in the dwelling, the owner of the dwelling is deemed to be that beneficiary. This is the case irrespective of whether the trustees register the title in the Land Register or not.
Spouses, civil partners, cohabitants and dependant children
Any dwelling owned by a spouse, civil partner, cohabitant or child under the age of 16 of a beneficiary with a relevant interest under a bare trust or settlement trust will potentially count towards the number of dwellings owned by the buyer. The buyer in these cases is the beneficiary and not the trustee who makes the purchase on behalf of the bare trust or settlement trust.
Examples
The trustee of a discretionary settlement (Trust) for the benefit of three beneficiaries purchases a dwelling as trustee. None of the beneficiaries have a right to occupy the dwelling under the Trust, nor can they require the trustee to pay them any income from the dwelling.
As the trustee is making the acquisition as trustee under the settlement and there are no interested beneficiaries, the ADS will apply. A beneficiary under the settlement is an interested beneficiary if they have, or will have, a relevant interest in the dwelling. Six months later, one of the beneficiaries purchases their first dwelling.
At the end of the day that is the effective date of the transaction, they own one dwelling and, because their possible future benefit from the trust does not amount to a relevant interest in any dwelling, the ADS will not apply. Note: If a beneficiary had a relevant interest in the dwelling, they would be treated as the owner of the dwelling.
Yellow has formal guardianship responsibility for Green, who is an adult with incapacity. Yellow decides to purchase a dwelling for Green to live in as their main residence, using Green’s funds, for which Yellow has responsibility. Yellow takes legal advice and a trust is set up for Green. The trust then purchases the dwelling on behalf of Green.
At the end of the day that is the effective date of the transaction, Green "owns" only one dwelling as Green is deemed to be the owner of the dwelling therefore the ADS does not apply.
LBTT10064 - Transactions involving proper liferents
Sometimes, when residential property is purchased, the buyer grants a proper liferent to a third party (the liferenter). This liferent is a right to enjoy the use and benefit of the property for the lifetime of the liferenter (or some other time period as set out in the deed which creates the liferent). On termination of the liferent, title will vest in another person known as the “fiar”.
Note: Proper liferents differ from "improper (or beneficial) liferents" which are created by Settlement Trusts (Liferent Trusts), whereby the liferenter enjoys the benefit of property by way of a trust.
For the purposes of determining whether the ADS is applicable, the LBTT(S)A 2013 provides that the liferenter is treated as the owner of the dwelling (deemed ownership), and that both the granter of the liferent and the fiar are to be treated as not being the owner. This is the case irrespective of whether the fiar registers their title in the Land Register or not.
Examples
Yellow owns two dwellings - a main residence and a buy-to-let property. Yellow decides to purchase a further investment property in which they will grant a liferent interest to Blue.
Blue currently owns a dwelling which is their main residence, but intends to sell this dwelling to free up capital, with the sale coinciding with the purchase of the new dwelling. At the end of the day that is the effective date of the transaction, the ADS is not applicable as, despite the fact that Yellow owns more than one dwelling, they are not deemed to be the owner of the newly purchased dwelling. The owner of the newly purchased dwelling is deemed to be Blue and Blue has just sold their PMR.
Purple retires and gifts the ownership of their existing main residence to Red. In return, Red grants Purple a liferent over the dwelling. This dwelling is worth £100,000. Purple then buys a second home for £125,000. At the end of the day that is the effective date of the transaction, Purple owns two dwellings (the second home plus the dwelling in which they hold a liferent interest and of which they are deemed to be the owner) and has not replaced a main residence. As the market value of the dwelling of which Purple is the deemed owner is over £40,000, the ADS will apply to the second home transaction.
Red and Green own a dwelling which is their main residence. They decide to purchase an investment property in which they will grant a liferent interest to Purple who currently lives in rented accommodation. At the end of the day that is the effective date of the transaction, Red and Green are regarded as owning one dwelling (their main residence) and Purple is regarded as being the owner of one dwelling by virtue of their liferent interest in the purchased dwelling. Purple does not own any other properties therefore, the ADS will not apply.
LBTT10065 - Transactions involving certain long leases
Standard residential leases, for example short assured tenancies, are exempt from LBTT, therefore, dwellings under a standard residential lease will not count towards the number of dwellings owned by a buyer.
However, where a buyer is a tenant of a dwelling under a long residential lease (a lease of residential property for a term in excess of 20 years), this may require to be counted as a dwelling owned by that buyer.
Long leases
Residential property leases for 20 years or more are long residential leases. A tenant with a long lease will be treated as the owner of the dwelling. The landlord will not be treated as the owner. A long residential lease will be counted as a dwelling owned by a buyer for the purposes of the ADS.
Due to The Land Tenure Reform (Scotland) Act 1974, leases of 20 years or more are no longer granted in Scotland.
All long residential leases granted prior to the commencement of the 1974 Act which comprised a "qualifying lease" of residential property automatically converted to ownership on 28 November 2015 by virtue of the Long Leases Act.
A "qualifying lease" under the Long Leases Act, in respect of residential property, is generally, a lease which, immediately before 28 November 2015, was:
(a) registered;
(b) granted for a period of more than 175 years and had more than 100 years remaining;
(c) had an annual rent of under £100.
Broadly, qualifying leases are comparable to "leasehold" title in England and Wales.
Where a buyer in a transaction has an interest in a dwelling held under a long residential lease which either did not fulfil the statutory conditions for conversion to ownership required by the Long Leases Act or was exempt from conversion under that Act, that dwelling will require to be counted as a dwelling owned by that buyer.
Any dwelling in either the rest of the UK or the rest of the world in which a buyer in a transaction has an interest on a leasehold basis equivalent to ownership in Scotland will require to be counted as a dwelling owned by that buyer for the purposes of the LBTT(S)A 2013.
For the avoidance of doubt, the provisions of the LBTT(S)A 2013 directly apply to any transaction in which the buyer acquires a "qualifying lease" of residential property. Where a buyer acquires such an interest in a dwelling held under a qualifying lease, the interest acquired is not a tenant's interest, but an ownership interest. Accordingly, the transaction will attract both LBTT at the standard residential rates and, if applicable, the ADS. Where the new acquisition is of a long residential lease that is not, for technical reasons, a ‘qualifying lease’, the transaction will be exempt under Schedule 1 to the LBTT(S)A 2013, although as mentioned the interest acquired will be counted as ownership for the purposes of counting owned properties under schedule 2A where purchases of additional dwellings are made.
Examples
Blue is purchasing a dwelling as a buy-to-let property and is keeping their existing main residence. The sellers in the buy-to-let purchase transaction have a registered title to the dwelling as tenants under a 900 year long residential lease. This lease converted to ownership on 28 November 2015 as a result of the provisions of the Long Leases (Scotland) Act 2012.
At the end of the day that is the effective date of the transaction, Blue owns two dwellings, their existing main residence and the buy-to-let property which is no longer owned on a leasehold basis. As Blue has not sold a previous main residence, the ADS will apply.
Red is the tenant of a dwelling held under a 150 year long residential lease which has a term of 80 years remaining. Red uses this dwelling as their main residence. Red decides to purchase a flat in Fife to use as a holiday home.
At the end of the day that is the effective date of the transaction, it is deemed that Red owns two dwellings and has not sold a previous main residence. Red is deemed to be the owner of the dwelling in which they are a tenant as the lease for this dwelling was for a term of more than 20 years and they also now own a holiday home. As a result, the ADS will apply.
Green and Yellow are tenants of a dwelling held under a 10 year residential lease. They use this as their main residence. Green and Yellow decide to sub-let their existing main residence and to purchase a next main residence.
At the end of the day that is the effective date of the transaction, Green and Yellow own only one dwelling as, because the lease of their previous main residence was for a term of less than 20 years, they are not deemed to be the owners of that dwelling. As a result, the ADS will not apply.
LBTT10066 - Transactions involving inherited dwellings
Individuals do not pay LBTT or the ADS on dwellings that they inherit. However, inherited dwellings will count towards dwellings owned by a buyer for the purposes of the ADS.
The period during which the personal representatives are settling the estate is called the period of administration. It starts on the day following the date of death of the deceased person and ends when the personal representatives have taken all the steps necessary to complete the administration of the estate.
The question of when an administration period ends is essentially one of fact and will depend on individual circumstances. Generally, this is the date when the residue of the estate has been ascertained or can be identified. The date when final accounts have been (or should have been) prepared is often taken as the date when the administration was completed.
An inherited dwelling counts as being owned by a beneficiary from the earlier of:
- the date that the period of administration of the estate ends based on the above
- the date the dwelling is transferred to the beneficiary (the date the executor grants and delivers a disposition or a docket transfer in favour of the beneficiary, whether or not registration of title is at a later date)
- under the law in another country, when the deceased’s interest passes to the beneficiary as an heir to the estate
- the date when the interest is actually transferred from the personal representative to the beneficiary in satisfaction of a bequest of that particular dwelling
- the date when the interest is actually transferred from the personal representative to the beneficiary in satisfaction of a pecuniary legacy or an interest in residue, following agreement with the beneficiary to accept the interest
If an individual owns a dwelling in their capacity as a personal representative (i.e. an executor) then they are deemed for the purposes of the LBTT(S)A 2013 not to be the owner of that dwelling.
For transactions with an effective date on or after 1 April 2024
Inherited properties exception
When counting the number of dwellings owned for the purposes of the ADS, the following applies:
- if on the effective date the buyer owns two dwellings
and
- the buyer has inherited a dwelling through transfer or conveyance from executors
and
- the date on which they acquire the inherited dwelling is:
- after they enter into a contract to purchase a dwelling
but - before the date of completion of this transaction
The inherited dwelling will not count for the number of dwellings owned for ADS purposes.
Examples
Yellow owns a dwelling which they use as their main residence (MR) (House 1). Yellow inherits a share of another dwelling from their parents (House 2). The inherited dwelling will count count as a dwelling for any future purchases made, if their share is valued at £40,000 or more. (This has been included in legislative change with effect from 1 April 2024 for transactions prior to this it is the whole property value rather than the share that is taken into consideration). Yellows’ share of the dwelling is valued at £55,000 and so will count towards the number of dwellings owned.
In November, Yellow decides to purchase a buy-to-let dwelling.
At the end of the effective date, Yellow will own three dwellings (House 1, House 2 and the newly purchased buy-to-let property). The ADS will apply.
Note: it does not matter where the inherited dwelling is based, it can be anywhere in the world and would still count for the purposes of counting the number of dwellings for ADS purposes, if the value of the share held is £40,000 or more for transaction on or after 1 April 2024. For transactions up to and including 31 March 2024 it is the whole property value being £40,000 or more rather than the share that is considered.
Red, Yellow and Green inherit equal shares in a dwelling. Yellow decides they don’t want to keep their share of the dwelling and agrees to sell this to both Red and Green. As both Red and Green already own a share of the dwelling they are treated as each owning the whole dwelling, no ADS will be due.
Note: No ADS is due on an inherited property, however, inherited properties may count towards the number of dwellings owned in any future transactions.
The following will count as a dwelling owned for the purposes of the ADS:
- For transactions on or after 1 April 2024 if the value of the share held is £40,000 or more.
- For transactions up to and including 31 March 2024 the whole property value being £40,000 or more.
Depending on the value LBTT may be due on this transaction.
LBTT10067 - Transactions involving dwellings for children to live in
Parents often help their children onto the property ladder. The ADS may be due on some of these property transactions. This will depend on the structure of the transaction and who will be the owner of the purchased dwelling.
Examples
Red and Yellow own a main residence together. They decide to purchase an additional dwelling for one of their teenage children to live in whilst they are at university. At the end of the day that is the effective date of the transaction, Red and Yellow own more than one dwelling and are not replacing their main residence, so the ADS will apply. It does not matter that the additional dwelling is not being rented out and is kept for family use only. If their child took title to the dwelling and was under 16, both Red and Yellow and their child would be treated as one economic unit therefore ADS would apply as Red and Yellow already own another dwelling.
Blue owns one dwelling, their main residence which they are not selling. They decide to purchase another dwelling jointly with one of their children, Red. The dwelling will be the first that Red will own and Red intends to live in the dwelling. At the end of the day that is the effective date of the transaction, Blue owns more than one dwelling and has not replaced their main residence, so the ADS will apply.
Red helps their child, Purple, purchase their first dwelling. Red gives Purple money towards a deposit and acts as a guarantor on the mortgage, but will not jointly own the dwelling with Purple. At the end of the day that is the effective date of the transaction, Purple owns one dwelling, so the ADS will not apply.
LBTT10018 - Transactions involving residential properties
Most property transactions that will be liable to the ADS will be residential property transactions.
Residential property transactions are transactions where the main subject-matter of the transaction consists entirely of an interest in land that is residential property or, where the transaction is one of a number of linked transactions, the main subject-matter of each transaction consists entirely of such an interest.
All transactions involving residential properties have the potential to be affected by the ADS.
For further guidance see: LBTT4010 - Meaning of residential property
LBTT10019 - Transactions involving non-residential properties
Generally, the ADS does not apply to non-residential property transactions.
Non-residential property transactions are where either:
1) the main subject-matter of the transaction consists of or includes an interest in land that is not a residential property or b) where the transaction is one of a number of linked transactions, the main subject-matter of any transaction consists of or includes such an interest or
2) where six or more separate dwellings are the subject of a single transaction involving the transfer of a major interest in them.
Full relief from the ADS is available on the purchase of six or more residential properties in one transaction. This applies to both individuals and non-individuals.
However, some transactions may include non-residential property and the ADS will apply, in part, to those transactions.
Where applicable, the amount of ADS that will apply will be 8% of the part of the chargeable consideration for that transaction attributable to the residential dwelling or dwellings. The chargeable consideration attributable to the residential dwelling or dwellings is calculated on the basis of a just and reasonable apportionment.
Examples
In May, Orange Limited decides to purchase licensed premises which includes a separate flat above the licensed premises. The company intends to rent the flat out. The total purchase price for both properties is £1,000,000. As the buyer is a company the ADS will apply.
However, the ADS will only apply to the amount of the consideration attributable to the residential purchase (the flat) and only if this part, in isolation, is £40,000 or more.
Note: the just and reasonable apportionment that applies when a transaction is subject to the ADS and includes both residential and non-residential property applies equally to individuals and non-individuals.
Red Limited are purchasing a house split into 8 flats in one transaction. The company does not own any other dwellings. As the house has been split into 8 parts, each of which can be used as a single dwelling, at the end of the day that is the effective date for the transaction, the company owns 8 dwellings.
However, 100% relief from the ADS is available for a transaction in which any buyer (individuals and non-individuals) purchases six or more separate dwellings in a single transaction. Red Limited will still pay LBTT for the property transaction but will not have to pay the ADS. The LBTT will be at non-residential rates.
Note: the relief would not have been available if the eight dwellings had been purchased in two separate transactions, neither of which comprised a transaction of six or more residential properties.