Please note: The Cabinet Secretary for Finance, Economy and Fair Work, Derek Mackay, has proposed increasing the rate of ADS from 3% to 4%. If approved by the Scottish Parliament, this will take effect from 25 January 2019.

Generally, transactions involving non-residential properties will be unaffected by the ADS. The ADS will, however, apply to any transaction where the subject matter of the transaction consists of or includes the acquisition of ownership of a dwelling.

There is therefore the potential for some transactions involving dwellings to be taxed as non-residential property transactions for the purposes of the LBTT(S)A 2013 and for the ADS to apply, at least in part, to those transactions.

The LBTT(S)A 2013 provides for two separate "non-residential property transaction" scenarios for the purposes of the application of LBTT:

1) Where either the main subject-matter of the transaction consists of or includes an interest in land that is not a residential property or, 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, such a transaction will comprise a "non-residential property transaction".

In the majority of cases, a non-residential property transaction will have no residential property aspect. There will be some non-residential transactions, however, which involve a residential property aspect, such as the purchase of a shop with a flat above.

2) Where six or more separate dwellings are the subject of a single transaction involving the transfer of a major interest in them, then those dwellings are to be treated as non-residential property for the purposes of the LBTT(S)A 2013.

In both of the above scenarios, LBTT is charged on such transactions at non-residential rates.

However, as the LBTT(A)(S)A 2016 provides for the subject-matter of a transaction to consist of or include the acquisition of ownership of a dwelling, the ADS will apply to any qualifying transaction involving residential and non-residential property or one involving the purchase of 6 or more dwellings. Full relief is available from the ADS, however, for any transaction in which a buyer (whether an individual or non-natural person) purchases six or more residential properties in one transaction. Further details on the ADS reliefs available can be found in part LBTT10040 of the guidance.

Where applicable to non-residential property transactions, the amount of ADS that will apply as a result of the LBTT(A)(S)A 2016 will be equal to a percentage of that part of the chargeable consideration for that transaction attributable on a just and reasonable apportionment to the dwelling or dwellings (including any interest or right pertaining to ownership of the dwelling or dwellings) purchased.

ADS rates for transactions on or after 25 January 2019

ADS is 4% of the ‘relevant consideration’ (usually the purchase price).

ADS rates for transactions prior to 25 January 2019

ADS is 3% of the ‘relevant consideration’ (usually the purchase price).

Where a process of just and reasonable apportionment determines that less than £40,000 of the chargeable consideration paid for a transaction involving residential and non-residential property relates to the dwelling or dwellings purchased, the ADS will not apply.

Transitional Provision 

Please note that where the effective date of a land transaction is on or after 25 January 2019 and the contract for the land transaction was entered into prior to 12 December 2018, the tax rates and bands for non-residential transactions that were in force prior to 25 January 2019 will apply.

Further details on how the ADS will affect certain non-residential property transactions are included part LBTT10030 of the guidance.

LBTT(S)A 2013 sections 24(4) and 59(8)

LBTT(A)(S)A 2016 schedule 2A paragraphs 3, 4 and 9

Archive Date: 
12 December 2018
Last updated: 
12 December 2018

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