The time period for reclaiming Additional Dwelling Supplement Tax paid on property transactions in Scotland is to be extended.

At present, a tax called Land and Buildings Transaction Tax (LBTT), requires to be paid on property purchases over £145,000 and over £175,000 for first time buyers (First Time Buyer Relief). The amount of tax to be paid is dependent upon the purchase price. This tax cannot be reclaimed.

However, for those who are purchasing a second or additional property an additional tax liability is also incurred known as the Additional Dwelling Supplement Tax (ADS). Under certain circumstances the additional tax liability can be reclaimed.

ADS is charged at 4% of the full purchase price in addition to the Land and Buildings Transaction Tax which is due to be paid upon completion of the purchase. ADS applies to the full price where the purchase price is in excess of £39,999. For example, the purchase of a second home at £200,000 the LBTT payable is £1,100 and the ADS payable is £8,000 making the total tax liability £9,100.

Currently ADS can be reclaimed if following the completion of a second property purchase the individual finalises the sale of their previous main residence and moves into the second home as their new main residence within 18 months from the date of the purchase of the second home. Upon completion of the sale of the previous main residence repayment of the ADS paid at the time of the purchase of the second home can be reclaimed from Revenue Scotland. Accordingly in the previous example the ADS of £8,000 can be reclaimed.

Given the current COVID-19 crisis and stay at home Government guidance individuals may find that they are unable to complete the sale of their previous main residence within the 18 month period due to restrictions which are in place.

The Scottish Government’s new COVID-19 committee has announced that measures will be implemented in the second Coronavirus Bill which will extend the period within which a main residence must be sold in order to reclaim ADS which may have been paid. This will only apply to ADS payments which were made before a specified date which has yet to be declared. If implemented, this change will prove to be a boost for the currently ‘on hold’ property market.

Contact The McKinstry Company today

If you have any questions regarding Land & Buildings Transaction Tax or Additional Dwelling Supplement Tax please contact at the property lawyers at The McKinstry Company where one of our solicitors will be able to advise you.