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The Additional Dwellings Supplement - Residential Property Tax

What is the Additional Dwellings Supplement?

The Additional Dwellings Supplement (ADS) is a 3% tax levied on the total value of residential property purchases of £40,000 and over. The ADS comes into play when a purchaser owns more than one residential property.

This tax is paid in addition to Land and Buildings Transaction Tax (LBTT) - a scaling tax that is applied to all residential property purchases of £145,000 or more in Scotland.

When is the ADS Applicable?

The ADS applies to businesses and individuals when, on the date of purchase when money is exchanged and keys handed over, the purchaser owns more than one residential property in Scotland or abroad.

The ADS does not apply when you are replacing your main residence. However, if you buy a new main residence before selling your current one the surcharge is payable. It can subsequently be reclaimed if the current main residence is sold within 18 months. The period between the purchase and sale of the main residence is known as the “gap period”.  

A full relief is also available for purchases of six or more dwellings. For more information on this, contact one of our specialist property purchasing team.

For further information about whether ADS applies in your situation, click to enlarge the chart below.

Additional Dwellings Supplement Chart

What is a 'Main Residence'?

This is determined by factors such as where you and your family spend your time, where you work and your correspondence address. In its simplest terms - would you consider it your home?

How do I reclaim the ADS?

If you are buying a new 'main residence' but have not yet sold your previous home, you will have to pay the ADS at the time of your purchase. However, if you sell your old home within 18 months of your purchase, you can reclaim the ADS you paid at the time. Visit the Scottish Government's website for more information on this. 

Case Studies

If you are still unsure about whether the ADS would apply, here are some examples where it would come into play.

Renting out main residence

If you buy a new main home and rent out your current main residence, then the ADS will apply. 

Owning property abroad

Although the ADS only applies to property bought in Scotland, foreign property will also be taken into account. Therefore, if your main residence is in England and you purchase a holiday home on the Isle of Skye in Scotland, then the additional 3% charge will apply. 

Joint Buyers 

If you are buying a buy-to-let property with your partner/spouse/civil partner and only one of you owns your main residence, the ADS will still apply. This tax treats married couples, civil partners and cohabitants as one unit. So if one spouse owns the marital home and the other buys a holiday home or a buy-to-let, then ADS applies and treats the purchase as a second property. 

Trusts

If you have property held in Trust, depending on the type of property, a purchase of a second residential property by the Trust will incur the ADS.

Additionally, legislation now states that beneficiaries of a Trust who have the right to occupy a property, receive income from it or have the right to proceeds from its sale through the Trust, are treated as owners of that property with respect to the ADS. 

Inheriting property

If you inherit property, you do not pay LBTT or the ADS. However, it will be taken into account if you then purchase an additional residential property. 

Buying for a child

It is common for parents to help their children get onto the property ladder and in some instances, this will attract the ADS. For example, if you were to buy an additional property for your son/daughter to live in whilst at university, the ADS will apply as you will own two residential properties. However, if you were to gift money to your son/daughter to buy the property in their full name, then provided your son/daughter did not already own another home, the ADS will not apply. 

Companies/Partnerships

For companies/partnerships/sole traders where their business deals with investing or acquiring residential property, the 3% ADS applies regardless of how many properties the company/partnership owns. Therefore, even if the company or sole trader does not already own other residential property, they will still be subject to the ADS.

To find out more about how Land and Buildings Transaction Tax and the Additional Dwellings Supplement are applied, got to our LBTT information page, or contact a member of the team.

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