In this section of the guidance, reference to a "buyer" or "buyers" is in the context of a buyer or buyers who are an individual or individuals i.e. natural persons as opposed to non-natural persons or bodies and does not included an individual who purchases a dwelling 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. Partnerships are included in this definition of buyer because Schedule 17 to the LBTT(S)A 2013 provides that a chargeable interest held by a partnership is treated as being held by the individual partner and a land transaction entered into by a partnership is treated as having been entered into by the individual partners.

The ADS will only apply where a buyer (or any one of 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 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 ADS will not apply where an individual purchases a first buy-to-let dwelling and that individual:

a) does not own an existing dwelling at the end of the effective date of the transaction and

b) 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 the sole or main activity of which is investing or dealing in property.

When determining how many dwellings a buyer (or group of buyers) owns for the purposes of the LBTT(A)(S)A 2016, all dwellings which have:

a) previously been acquired by the buyer (or each individual buyer) in the course of a business, the sole or main activity of which is investing or dealing in property, and

b) been subject to the ADS (as a result of a)

can be discounted.

This also applies to dwellings purchased outside of Scotland which, had they been purchased in Scotland, would have been subject to the ADS as a result of having been acquired in the course of a business, the sole or main activity of which 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. Further details on the ADS reliefs available can be found in part LBTT10040 of the guidance.

Replacing a main residence after a gap period

If, at the end of the day that is the effective date of the transaction, a buyer owns two or more dwellings, whether that buyer pays the ADS or not for that transaction will depend on whether they have replaced their main residence. Further details on how to determine if an "only or main residence" has been replaced is included in part LBTT10020 of the guidance.

In order to have "replaced an only or main residence", a buyer must have sold their previous main residence within the 18 month period ending with the day that is the effective date of the next main residence purchase transaction and must intend to occupy the  dwelling in that transaction as their only or main residence.

Where a buyer has simply replaced a main residence, the ADS will not apply, irrespective of how many dwellings the buyer owns.

However, if a buyer has not replaced a main residence (either because they have not sold a previous main residence within the 18 month period ending with the day that is the effective date of the next main residence purchase transaction or the dwelling being acquired in that transaction is not intended to be used as their main residence), and at the effective date of the transaction the buyer owns more than one dwelling, the ADS will apply.

It is possible that as part of a chargeable transaction, a buyer will acquire ownership of more than one dwelling, and that one of the dwellings acquired will be the replacement of a previous main residence. If that is the case, the ADS will not be payable on the consideration attributable to the next main residence, but will be payable on the consideration attributable to the other dwellings acquired. Paragraph 4(4) of the LBTT(A)(S)A 2016 explains that the consideration must be attributed on a just and reasonable basis between the dwellings acquired. 

Details relating to how to determine if a main residence is being replaced can be found in Part LBTT10020 of the guidance.

Paragraph 4(4) of the LBTT(A)(S)A 2016

Delayed sale of a main residence

There will be instances where a buyer may not have been able to sell their previous main residence by the end of the day that is the effective date of a next main residence purchase transaction, either because missives have not yet been concluded, there has been a break in the property chain or due to an inability to find a buyer.

That buyer will find that, at the end of the day that is the effective date of the next main residence purchase transaction, they are the owner of two dwellings.

In such a case, the ADS will apply to the next main residence purchase transaction but the buyer may be eligible to claim a repayment of the additional LBTT paid for the next main residence purchase transaction if they sell their previous main residence within an 18 month period beginning with the day after the effective date of the next main residence purchase transaction. Further details of when such a repayment may be claimed is contained in part LBTT10070 of the guidance.

Where the sale of the previous main residence occurs after the effective date of the purchase of the buyer’s next main residence, but before an LBTT return has been made, the ADS does not require to be paid.  Further guidance on making returns is provided in part LBTT10050 of the guidance.

LBTT(S)A 2013, schedule 17

LBTT(A)(S)A 2016 schedule 2A paragraphs 2, 8 and 11.

Example 3: Standard "Buy-Sell" transaction: buying one main residence, selling another

Example 4: Main residence owner purchasing first rental dwelling

Example 5: First-time buyer

Example 6: Portfolio owner replacing main residence

Example 7: Holiday home owner replacing main residence

Example 8: Buyer buying their next main residence but not replacing old main residence

Example 9: Buyer buys first dwelling followed by a later rental purchase

Example 10: Holiday home owner potentially replacing a main residence

Example 11: Portfolio owner acquiring next main residence having sold previous main residence

Example 12: Portfolio owner selling one rental dwelling and buying another

Example 13: Portfolio owner acquiring a main residence

Example 14: Large portfolio owner replacing a main residence

Example 15:  Owner of two dwellings - sale of previous main residence delayed

Example 16: Deliberate ownership of two dwellings - existing main residence to be sold in near future

Example 17: Purchase of next main residence plus other dwelling, previous main residence being sold:

Example 18: Buyer buys first dwelling as individual, buyer already owns dwellings as part of sole trader property investment business 

Diagram 1 below provides both a basic description of how the ADS may affect the purchase of a dwelling by an individual and a simple means of determining whether such a purchase is liable for the ADS. It should be noted that other factors can have an effect on the determination process dependent upon the facts and circumstances in the case of each transaction. This guidance contains full details of these other factors therefore this Diagram cannot be read in isolation.

Diagram 1

Simple ADS "Purchase by Individual*" Transaction Flowchart

*Does not apply to purchases by an individual who is purchasing 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.

 
 
 
 
 
Archive Date: 
6 April 2016
Last updated: 
6 April 2016

Archive

Updated date: 2016-04-07 14:33
Version ID: 1361
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