These FAQs should be used as a basic introduction to the supplement. More detailed information is available in the legislative guidance to help taxpayers and their agents understand whether or not their particular transaction is subject to the supplement.
- 1.01 What is the Additional Dwelling Supplement?
It is an LBTT supplement on purchases of additional residential properties in Scotland (such as buy-to-let properties and second homes) of £40,000 or more. The Land and Buildings Transaction Tax (Amendment) (Scotland) Act 2016 completed the parliamentary process on 8 March 2016 and the ADS came into force on 1 April 2016.
- 1.02 Why has the Scottish Government introduced an Additional Dwelling Supplement?
The Deputy First Minister stated when setting out the Scottish Government proposals in the 2016-2017 Draft Budget that the Scottish Government wished to ensure, as far as practical, that opportunities for the first time buyers to enter housing market in Scotland were as strong as they possibly could be.
The UK Government introduced a new Stamp Duty Land Tax (SDLT) supplement on the purchase of additional residential properties in the rest of the UK on 1 April 2016.
Absence of a similar supplement in Scotland could make it more attractive to invest in additional residential properties in Scotland compared to the rest of the UK, particularly at the lower end of the market, making it difficult for the first-time buyers in Scotland to buy their first home.
- 1.03 How much is the Additional Dwelling Supplement and what does it apply to?
Please note: The ADS rate was changed by the Scottish Parliament on 25 January 2019. The contract date and the effective date of your transaction will determine whether the changes affect you (see Transitional Provision below).
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.
Further information can be found at LBTT10080.
Calculating the ADS
The Additional Dwelling Supplement is 4 per cent of the total purchase price of an additional residential property purchase of £40,000 or more. Where applicable, it will be payable in addition to the LBTT that would be due on the acquisition. Similarly any house already owned must be worth £40,000 or more for the Additional Dwelling Supplement to apply.
An additional house purchased for £39,999 would not attract the Additional Dwelling Supplement but an additional house purchased for £40,000 or more would.
Individual owns a residential property which is their main residence and decides to buy an additional property with a purchase price of £200,000 which individual intends to rent out. The Additional Dwelling Supplement would be £200,000 x 4% = £8,000.
- 1.04 When did the Additional Dwelling Supplement take effect?
The supplement was introduced on 1 April 2016.
- 1.05 Are there any exemptions or reliefs from the Additional Dwelling Supplement?
The existing exemptions which apply to LBTT transactions also apply to transactions involving the purchase of additional dwellings. Consequently, where a transaction is exempt from LBTT, it will not be subject to the ADS. There is also a specific ADS relief for purchases of 6 or more separate dwellings. Full relief is available for any transaction to which section 59(8) LBTT(S)A 2013 applies. Therefore any transaction treated by that section as being non-residential, because it involves the acquisition of 6 or more dwellings in one transaction, will not be subject to the ADS if the relief is claimed.
- 1.06 Has Revenue Scotland's guidance material been updated to reflect the introduction of the Additional Dwelling Supplement?
Revenue Scotland has published Legislative Guidance and updated its ‘How To’ Guidance to assist those involved in making a return where the supplement applies. The guidance has been developed with input from external users. In addition, the Tax Calculator has also been updated.
- 1.07 Can I claim a repayment of ADS that I have paid?
Yes, in certain circumstances. Please see LBTT10070 - 'Amendments to returns/ repayment claims' for full details.
- 1.08 How do I claim a repayment of ADS?
If a return was submitted using the paper return or;
the claim is being submitted after the 12 month period or;
you no longer have access to the original online return, please follow the guidance on how to complete an ADS Repayment Claim Form.
If the return was submitted online and is within the 12 month amendment period, please follow the guidance on how to amend and online LBTT return to claim repayment of ADS.