Land and Buildings Transaction Tax - Additional Dwelling Supplement: call for evidence and views

3. Claiming a Repayment of the ADS

3.1 The Scottish Government recognises that some buyers may purchase a new main residence before disposing of the ownership of their previous one. As such the legislation provides that, if paid, the ADS can be reclaimed if certain requirements are met.

3.2 This chapter provides some statistics about the number of claims for repayment of the ADS which are made, along with some commentary on the legislative arrangements which allow for this. The points set out in paragraphs 2.2 to 2.4 apply equally to this chapter.

How often are claims made for a repayment of the ADS?

3.3 The LBTT return includes a box to indicate that the taxpayer intends to reclaim the ADS. This enables Revenue Scotland to understand those payments which might be reclaimed in future. There is however no requirement to indicate an intent to claim a repayment, and not doing so does not prevent a claim being made. Equally, some people who indicate that they intend to claim a repayment may eventually opt to hold on to their previous property or have done so erroneously.

3.4 Over the five year period from 1 April 2016 to end March 2021, the latest annual Revenue Scotland statistics^[27] indicate that:

• 77% of those who paid the ADS did not intend to reclaim it at the time of the transaction. (85,830 transactions);
• 23% of those who paid the ADS indicated that they did wish to reclaim it (26,170 transactions); and
• Over each of the five years, the percentage of those who intended to claim a repayment of the ADS that went on to do so has ranged from 63.4% to 70.4%.^[28]

Considering whether the ADS can be repaid.

3.5 The ADS legislation provides that the ADS can be repaid if three conditions^[29] are met:

• The buyer sells a dwelling, which was not the dwelling subject to the ADS in the first instance, within an 18 month period^[30] from the day after the effective date of the transaction;
• The dwelling sold was the buyer's only or main residence during the 18 month period ending with the effective date of the transaction; and
• The dwelling that was subject to the ADS has been occupied by the buyer as their only or main residence.

3.6 The 18-month period here is intended to provide a balanced approach. It takes account of the potential for sales of a property to be delayed whilst also providing certainty to the Scottish Government in terms of tax revenues.

3.7 For joint buyers, in determining whether a repayment of the ADS can be claimed, the provisions in Section 48 of the Act discussed at 2.20 are again relevant. They mean that all buyers have to satisfy the three conditions in order for the ADS to be repaid, unless specific provisions applying to spouses, civil partners or cohabitants in paragraph 8A of Schedule 2A^[31] apply.

3.8 These provisions work in a similar away to the provisions at paragraph 9A.^[32] They allow for repayment of the ADS if: either buyer can satisfy the first condition by disposing of the ownership of a dwelling in the 18 month period; and both buyers can satisfy the second and third conditions. This means that both buyers must have lived in the dwelling sold as their only or main residence in the relevant 18 month period and have occupied the new property as their only or main residence.

Revenue Scotland Worked Example^[33]

Jim and William are purchasing a dwelling jointly which is intended to be their main residence. They each already own a dwelling, which they (separately) used as a main residence. Neither previous main residence was sold at the time of purchase.

Upon purchase, as they will each be deemed to own three dwellings and they will not (yet) have replaced their main residence, the ADS will apply. Jim then sells his previous main residence 5 months later. But they will not yet be able to claim a repayment of ADS, as the joint buyers have not replaced their main residence. William then sells his old house 13 months later. At this point, Jim and William will be eligible to claim a repayment of the ADS they paid.

Revenue Scotland Worked Example – Paragraph 8A^[34]

Marc and Ava currently live together in their main residence solely owned by Ava. They decide to jointly purchase a new main residence which will replace their previous main residence. Unfortunately, the previous main residence does not sell prior to the effective date.

Therefore, the ADS is payable on the purchase of the new main residence as at the effective date the couple own or are deemed to own more than one dwelling and they have not sold their previous main residence.

The previous main residence sells 5 months later. Although only one of the joint buyers (Ava) has actually replaced or sold their previous main residence paragraph 8A, Schedule 2A of the Act applies and a repayment of the ADS already paid can be claimed.