Under the LBTT(S)A 2013, the amount of LBTT to be paid in relation to a chargeable transaction is calculated by applying the tax rates and bands to the amount of chargeable consideration for the transaction. Detailed guidance relating to how the chargeable consideration for a transaction should be determined is contained in part LBTT2001 of the guidance.

The guidance contained in LBTT2001 will help you establish the chargeable consideration for a land transaction. Details are also given on what constitutes the chargeable consideration in a land transaction (LBTT2002), what items are not included in the chargeable consideration in a land transaction (LBTT2009) and what is meant by "market value" (LBTT2016).

In determining the amount of consideration that is chargeable to the ADS, a different mechanism applies. This mechanism is detailed in paragraph 4(3) of schedule 2A to the LBTT(A)(S)A 2016 and it is a mechanism that relies on the concept of "relevant consideration".

"Relevant consideration" is the proportion of a chargeable consideration for a transaction that is attributable to the residential element of a transaction.

The ADS that will be payable under the LBTT(A)(S)A 2016 will be charged at 3% of the "relevant consideration" for a transaction.

For transactions relating to a residential property transaction, the "relevant consideration" to which the ADS will be applied will be the chargeable consideration for that transaction.

A residential property transaction is a transaction 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.

For the vast majority of residential property transactions, the "relevant consideration" will therefore be the purchase price. For those residential property transactions where the chargeable consideration is not the purchase price, part LBTT2001 of the guidance may be helpful.

For affected residential property transactions, the ADS will therefore result in an additional 3% LBTT being charged on the full purchase price of the transaction. Examples 1 and 2 in part LBTT10011 of the guidance demonstrate how the ADS affects residential property transactions.

For those non-residential property transactions affected by the LBTT(A)(S)A 2016, the ADS that will require to be paid will be charged on the proportion of the chargeable consideration for a transaction attributable to the residential element only.

Para 4(3)(b) provides that the "relevant consideration" will comprise so much of the chargeable consideration for the transaction as is attributable, on a just and reasonable apportionment, to the acquisition of ownership of the dwelling or dwellings (including any interest or right pertaining to ownership of the dwelling or dwellings) that is or forms part of the subject-matter of the transaction.

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.

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 the above scenarios, LBTT is charged on such transactions at non-residential rates (subject to a claim for Multiple Dwellings Relief being made in scenario 2 above).

However, the "relevant consideration" mechanism will mean that, effectively, a separate charge (the ADS) will be made on any applicable non-residential property transaction when the subject matter of that transaction includes the acquisition of the ownership of a dwelling. That separate charge will be on top of the charge made as a result of the application of the non-residential LBTT rates and bands.

The separate charge (the ADS) will result in a 3% charge being applied to so much of the chargeable consideration for that transaction as is attributable, on a just and reasonable apportionment, to the acquisition of the dwelling or dwellings (including any interest or right pertaining to ownership of the dwelling or dwellings) that is or forms part of the subject-matter of the transaction.

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. The LBTT liability for a non-residential property transaction that includes the acquisition of a dwelling and transactions of 6 or more dwellings will therefore be the sum of the application of the non-residential LBTT rates and bands (subject to a claim for Multiple Dwellings Relief being made) to that transaction plus 3% of that part of the chargeable consideration for that transaction which relates, on a just and reasonable apportionment basis, to the acquisition of a dwelling or dwellings.

Full relief from the ADS is available, 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.

When a chargeable transaction involves both the purchase of a replacement main residence and also the acquisition of the ownership of other dwellings, the ADS will be payable on the proportion of the supplement that relates to the dwellings acquired that are not the new main residence. Para 4(4) provides that when someone enters into such a transaction, that the relevant consideration the ADS is charged on excludes the amount that is attributable, on a just and reasonable basis, to the replacement main residence.

LBTT(S)A 2013, schedule 2 and sections 24(3), 24(4) and 59(8)

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

Example 33: Transactions involving the purchase of residential and non-residential property

Example 34: Purchase of multiple dwellings

Example 35: Purchase of next main residence plus other dwelling, previous main residence being sold

Example 35A: Individual acquiring a half share of a dwelling with a new mortgage being taken

Example 35B: Individual acquiring a half share of a dwelling and assuming existing mortgage debt

Example 35C: Individual acquiring the remaining share of a dwelling and assuming existing mortgage debt