The beginning of this month brought a significant amendment to the existing rules regarding Additional Dwelling Supplement. Property owners replacing their main residences now have 36 months to do so, previously 18 months.
What is ADS?
Additional Dwelling Supplement was introduced to Scotland in April 2016 and imposed a supplemental property tax following similar taxes brought into effect in the rest of the UK. The additional tax applies where anyone purchases a property which results in that person owing more than one property at the same time. Commonly referred to as a second home tax, the result is a 6% charge on the purchase price. This is in addition to the usual Land and Buildings Transaction Tax payable at completion.
Main Residence Exemption
There are limited exemptions to ADS. The principal one being replacement of a main residence. No matter how many properties a person owns, that person is entitled to move their permanent residence without being liable to pay the 6% charge. Therefore, provided a main residence is replaced on or before the day the new purchase completes, there is no ADS payable.
The issue arises where a simultaneous sale and purchase does not occur on the same day and ADS applies. In such cases, the buyer must pay ADS on the purchase price of their new property. However, provided they can sell their (now previous) main residence within 18 months of concluding missives of the purchase, ADS may be reclaimed from Revenue Scotland (with interest). This change from 1 April 2024 means this 18 month period is extended to 36 months, affording buyers additional time to sell their previous residences in order to reclaim ADS paid at the time of purchase. This is a welcome amendment which brings Scotland in line with the timescales imposed in the rest of the UK. It should be noted that the change is not retrospective. If missives are concluded to purchase a new main residence prior to 1 April 2024, the buyer still only has 18 months to sale the previous residence and reclaim ADS.
When determining the number of properties owned for the purposes of ADS, spouses and cohabitants are treated as one. Therefore, it is not possible, if one spouse or cohabitee already owns a property, for the other spouse or cohabitee to acquire the second property in their sole name. For ADS, both spouses or cohabitants will be treated as owning the first property and ADS will be payable on the second purchase, regardless if legal title is taken in the name of one or both spouses or cohabitants.
ADS should be considered when purchasing property in Scotland and our property specialists at J & H Mitchell WS are on hand to provide advice. Please contact one of our property lawyers for further information.
April 2024
7.00 p.m., Thursday 21st March 2024, Perth
J & H Mitchell WS, Solicitors, will be hosting a seminar for Charity Trustees at The Soutar Theatre, A.K. Bell Library, Perth on Thursday 21st March 2024.
The session will be delivered by Sarah Brown WS, who heads up the J & H Mitchell WS Charities and Communities Team and is accredited by the Law Society of Scotland as a specialist in Scottish Charity Law.
The 90-minute seminar will provide Charity Trustees with practical guidance and an insight into various hands-on aspects of their role, actions and legal responsibilities.
The session will also highlight the changes to Scottish Charity law which will be introduced by the Charities (Regulation and Administration) (Scotland) Act 2023, following Royal Assent in August 2023.
It is a case of ‘the more the merrier’ at our Charity Seminars, where we recommend that as many Trustees of a charity try to attend the Seminar together, so that they can speak about it together afterwards.
Attendance is free and places must be reserved in advance.
If you would like to attend, please either contact our office on 01796 472 606 to book a place or by email to info@jandhmitchell.com, providing your name and the name of your organisation.
For more information about J & H Mitchell WS and the other services that we provide, please visit us at www.jandhmitchell.com.
51 Atholl Rd,
Pitlochry,
Perthshire,
PH16 5BU,
Scotland
2 The Square,
Aberfeldy,
Perthshire,
PH15 2DD,
Scotland
9 The Cross,
Dunkeld,
PH8 0AN,
Scotland
