Change of ADS rate

The ADS rate was changed to 4% with effect from 25 January 2019. The contract date and the effective date of your transaction will determine whether the changes affect you.   

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 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 rate of 3% for ADS that was in force prior to 25 January 2019 will apply.

Example

Arran is looking to purchase a new main residence. He finds a suitable dwelling and enters into the contract on 8 December 2018. There is a delay in the processing of his mortgage and the sale does not conclude until 30 January 2019.

Arran decides not to sell his previous main residence and therefore ADS will apply to his transaction. Although the transaction completed after 25 January 2019, ADS will be charged at 3% as the contract was entered into prior to 12 December 2018.

Further information on contract and conveyance can be found in LBTT1005.

How to complete a tax return when transitional provisions apply

When completing the tax return, the calculation is based on the effective date. Any transaction with an effective date of 25 January 2019 or after will be calculated on SETS with the ADS being charged at 4%.

Where the contract for the transaction has been entered into prior to 12 December 2018, but the effective date is after 25 January 2019, ADS will be charged at 3%. In order to show this on the LBTT tax return you must overwrite the tax due in the ‘Total amount of tax due for this transaction:’ box.

You must also make sure you complete the ‘date of contract or conclusion of missives’ box at the beginning of the return. This will allow Revenue Scotland to see that you entered into your contract prior to 12 December 2018. 

Example

Brendan purchases a £200,000 property. He decides not to dispose of his previous main residence and therefore ADS applies to this transaction.

Brendan entered into the contract for this property on 10 December 2018. However the transaction did not complete until 27 January 2019. As he entered into the contract prior to 12 December 2018, ADS will be charged at 3%.

When Brendan’s agent completes the LBTT tax return they input the 10 December 2018 into the ‘Date of contract of conclusion of missives’ box on page 1 of the return.

 

When Brendan’s agent reaches page 6 of the return they select ‘calculate’ to see the tax due to be paid. As the effective date is after 25 January 2019, the SETS system calculates ADS at 4% of the chargeable consideration.

In order to make sure ADS is paid at 3%, Brendan’s agent will have to overwrite the amount of tax at the box ‘ADS less relief/repayment’.

Once the ADS has been overwritten to the correct amount, the ‘Total amount of tax due for this transaction’ is updated and shows the correct amount due.

Application of ADS

The ADS will only apply to a transaction involving a purchase of additional property where (a) the contract for the transaction was entered into on or after 28 January 2016 and (b) the effective date of that transaction is on or after 1 April 2016.

Where a contract for such a transaction was entered into on or after 28 January 2016 and completed before 1 April 2016, the ADS will not apply.

Where a contract for such a transaction was entered into before 28 January 2016 but not completed until on or after 1 April 2016, the ADS will not apply.

Further details on how to determine the effective date of a transaction can be found in part LBTT1004 of the guidance.

Example 75: Transitional arrangements, contract entered into before 28 January 2016

Example 76: Transitional arrangements, contract entered into on or after 28 January 2016

The Land and Buildings Transaction Tax (Additional Amount – Second Homes Main residence Relief) (Scotland) Order 2017 (SSI Order 2017).

The SSI Order amends the ADS rules around family units and replacing main residences including the rules on claiming repayments, in Schedule 2A of the Land and Buildings Transaction Tax (Scotland) Act 2013 by introducing two further paragraphs, 8A and 9A. The amendments will apply to transactions where a) the contract was entered into on or after 20 May 2017 and b) the effective date of the transaction is on or after 30 June 2017.

Example 47A: One spouse owns main residence, joint purchase of new main residence but the transaction does not meet the conditions of the amended Legislation