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 you are a buyer (or, in the case of joint buyers, one of the buyers, as each is considered individually) who owns only one dwelling at the end of the day that is the effective date of a transaction, you will not pay the ADS. The question of whether or not a main residence is being replaced does not arise.
You will need to determine whether you have replaced a main residence only if you 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 when you move house, you will purchase and sell property on the same day.
Where a main residence is not being replaced, because the former main residence has not yet been sold, the ADS will apply. If you have 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 you will have to pay ADS. But you may be able to claim it back when you later sell the former main residence. This situation is considered in more detail in part LBTT10070 of the guidance.
Determining an individual’s main residence
The following guidance should be used to determine which dwelling is a person’s main residence. Once you have established which property is your main dwelling, you should then use the ‘two-stage test’ (see below) to determine whether you are, or are capable of, replacing your main residence.
For the purposes of determining the liability for the ADS, you can have only one main residence at a time. Although "only or main residence" is not defined in the LBTT(A)(S)A 2016, in most cases where you own more than one dwelling it will be clear which one is your main residence.
There is no provision in the LBTT(A)(S)A 2016 to allow you to elect which of the dwellings you own is your 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 (where an election is possible). 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 that position.
Your main residence is usually where you live and spend most of your time. It does not matter whether you own or rent your main residence or lives in it free of charge.
Your main residence may be the residence where you spend less time if that's where:
Most of your possessions are;
Where your family lives, if you are married or in a civil partnership, or you live with your children;
Where you are registered with various organisations, such as a bank, GP or an insurance company;
Where you are a member of clubs and societies.
You may spend less time in their main residence than in another residence if you live away because of work commitments, for example as 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 you have children, where they go to school;
Where you are registered to vote;
- Where you work.
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 4A: Buy-to-let owner purchasing new main residence, existing main residence was rented
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.