LBTT10040 - Exemptions and reliefs from the ADS
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.
For example, the gift of a dwelling under paragraph 1 of schedule 1 to the LBTT(S)A 2013 will not be subject to the ADS (although that gifted dwelling would count as a dwelling for the purposes of establishing whether the ADS applied to acquisitions of other dwellings by the recipient of the gift). Similarly, no ADS would be due where someone inherited a dwelling (although the inherited dwelling would count as a dwelling for the purposes of establishing whether ADS applied to acquisitions of other dwellings made by a buyer who had inherited a dwelling).
The existing reliefs which apply to LBTT transactions also apply to transactions involving the purchase of additional dwellings. For example, the relief from LBTT for house builders involved in part exchange deals, certain acquisitions by registered social landlords and for certain compulsory purchases by local authorities provided for in schedules 4, 6 and 14 to the LBTT(S)A 2013 also apply to the ADS.
Part LBTT3001 of the guidance contains full details on those exemptions and reliefs available under the LBTT(S)A 2013.
Transactions which are not subject to any of the ordinary LBTT exemptions or reliefs, or that only enjoy partial relief, will otherwise be potentially affected by the ADS, though if partial relief is claimed from LBTT, the ADS payable will be reduced in the same proportion to the underlying LBTT.
Relief from ADS for purchases of 6 or more dwellings
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.
The relief must be claimed in the first LBTT return made in relation to a transaction to purchase six or more residential properties or in an amendment of that LBTT return.
The interaction of ADS with LBTT Multiple Dwellings Relief
The rules for Multiple Dwellings Relief (MDR) are set out in schedule 5 of the LBTT(S)A 2013. Further details relating to this can be found at part LBTT3015 of the guidance. These rules are amended slightly for transactions to which the ADS applies.
In cases where the ADS is payable, the steps needed to calculate the amount of tax payable when MDR is claimed are fundamentally unchanged. The difference for cases in which the ADS is payable is that once the calculation of ‘DT’ (tax due in relation to a dwelling) has been made, rather than multiply this amount by the number of dwellings you have to work out the tax due, DT, on each dwelling and then add them all together. The calculation therefore becomes ∑DT, rather than DTxND in paragraph 10 of schedule 5 to LBTT(S)A 2013, where ND is the number of dwellings.
In the majority of cases, DT will be the same for each dwelling as it is calculated on the basis of average consideration (total consideration divided by the number of dwellings purchased), and so the calculation will produce the same result.
The difference will come when a chargeable transaction involves the purchase of multiple dwellings, and the supplement is payable on some, but not all of those dwellings (i.e. one of the dwellings may be the replacement of a main residence and the supplement therefore would not be payable on it).
When this is the case, DT is worked out individually for each dwelling. The ADS is applied to the calculation of DT for the dwellings on which the ADS payable, but not to the calculation of DT when it is not. Example 38 of this section of the guidance illustrates such a case.
When relief is claimed for a purchase that is treated as non-residential by section 59(8) of LBTT(S)A 2013, the calculation of DT must reflect the fact that relief has been claimed. So when calculating DT at residential rates, the ADS will normally be part of that calculation (unless as explained above that one dwelling is part of a multiple purchase but is also the replacement of a main residence), but the ADS is not part of the calculation for DT when relief has been claimed for transactions that are treated as non-residential by section 59(8).
Relief for the replacement of main residence: Spouses, civil partners and cohabitants
The Land and Buildings Transaction Tax (Additional Amount – Second Homes Main Residence Relief) (Scotland) Order 2017 (SSI Order 2017) 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.
Prior to the SSI Order 2017 any transactions:
- where spouses or cohabitants jointly bought a dwelling, and
- prior to the purchase they sold a dwelling that they both lived in but was owned by only one of them, and
- at the effective date of the new joint purchase either buyer owned or was deemed to own a further dwelling,
then the ADS would apply to the purchase because both buyers were not replacing their main residence (as the previous main residence was owned by only one of them). The SSI Order 2017 introduces relief (paragraph 9A of schedule 2A to the LBTT(S) Act 2013) that means in these circumstances the purchase made by the joint buyers would not attract the ADS because both buyers would be treated as replacing their main residence. For the relief to apply, the property sold must have been the main residence of both the joint buyers, and these joint buyers must be spouses, civil partners or cohabitants.
The relief should be claimed in the first LBTT return made in relation to a transaction or in an amendment of that LBTT return.
Example 36: Purchase of 8 dwellings
Example 37: Purchase of 5 dwellings
Example 38: Purchase of 4 properties, with the ADS applying to some but not all
Example 39: Purchase of 4 dwellings followed shortly after by another purchase of 4 dwellings
Example 48A: One spouse owns main residence, joint purchase of new main residence