The question regarding whether an "only or main residence" is being replaced applies only to purchases by an individual who 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. It also does not apply to purchases by non-natural persons.
Where a buyer (or, in the case of joint buyers, all buyers collectively, each being considered individually) only owns one dwelling at the end of the day that is the effective date of a transaction, they will not pay the ADS therefore the question of whether or not a main residence is being replaced does not arise.
Buyers will only need to determine whether they have replaced a main residence if they own two or more properties at the end of the day that is the effective date of a transaction.
Where a main residence is being replaced, the ADS will not apply. This is likely to be the case in the vast majority of standard residential transactions as, in most cases, an individual moving house will purchase and sell property on the same day.
Where a main residence is not being replaced, the ADS will apply. In some cases, it is likely that this will be the case where an individual has been unable to sell an existing dwelling before the end of the day that is the effective date of the transaction for the purchase of a new dwelling. This situation is considered in more detail in part LBTT10070 of the guidance.
For the purposes of determining the liability for the ADS, individuals can only have one main residence at any given time. Therefore, although the term "only or main residence" is not a term that is defined in the LBTT(A)(S)A 2016, in most cases where an individual owns more than one dwelling it will be clear which one is that individual's main residence.
There is no provision in the LBTT(A)(S)A 2016 to allow an individual to elect which of the dwellings they own is their main residence. In this respect, the treatment of a main residence for the purposes of the ADS may differ from the treatment of a main residence for the purposes of Capital Gains Tax. Instead we will use the same factual test as is applied to decide where a person lives within the UK for the purposes of determining whether the Scottish Rate of Income tax (SRIT) will apply. If HMRC has already made a determination in this regard and the circumstances have not changed, Revenue Scotland will accept the same position.
An individual's main residence is usually where that individual lives and spends most of their time. It does not matter whether that individual owns or rents their main residence or lives in it for free.
An individual's main residence may be the residence where they spend less time if that's where:
Most of their possessions are;
Where their family lives, if they are married or in a civil partnership;
Where they are registered with various organisations such as a bank, GP or an insurance company;
Where they are a member of clubs and societies.
An individual may spend less time in their main residence than in another residence if they live away because of work commitments e.g. a lorry driver, offshore worker or member of the armed forces.
We will therefore consider whether a dwelling is an individual's main residence or not on the basis of fact. Other factors which we may look to in order to make a determination include:
If the individual has children, where they go to school;
At which residence the individual is registered to vote;
Where the individual works.
In most cases the position will be clear and few factors will need to be considered. For example, where a married couple own two dwellings, one of which is convenient for work and their children’s school and where they spend most of their time, and the other a holiday home which they visit occasionally, the first of these is their main residence for the purposes of the ADS.
Example 31: Individual has two homes but spends more time at main residence
Example 32: Individual has two homes but spends less time at main residence
Replacing a main residence - the two stage test
The LBTT(A)(S)A 2016 contains provision for a two stage test to determine whether a purchase of dwelling is a replacement of a main residence or not.
The first is whether, at the time of the transaction, a dwelling sold in the last 18 months was the only or main residence of the buyer. The second is whether the buyer of the new dwelling intends to occupy that dwelling as their only or main residence.
When considering the first stage of the test, the dwelling being sold must have been an only or main residence of the buyer in this purchase transaction at some point in the 18 month period prior to the day that is the effective date of the next main residence purchase transaction. In the majority of cases, an individual owns only one residence throughout a period, and it is this residence that will be their only or main residence
Where a buyer has more than one residence, which of these was their main residence will be a question of fact.
The second stage of the test is prospective and based on whether the buyer intends to use the newly purchased dwelling as their only or main residence. Where an individual has made plans at purchase date to move into the new dwelling as their only residence, it will be obvious that the intention test is met. In such a case, the ADS will not apply.
Where evidence clearly shows that either another dwelling will continue to be the buyer’s main residence or that the newly purchased dwelling is purchased for some other purpose (such as in the course of a business the sole or main activity of which is investing or dealing in property), the transaction will not be a replacement of a main residence. In such a case, the ADS will apply.