Can you get Scottish ADS or LBTT back if you buy a second property and quickly sell it after a short-term let licence is refused?

Introduction

Buyers often ask whether Scotland’s Additional Dwelling Supplement (ADS) and Land and Buildings Transaction Tax (LBTT) can be reclaimed if a planned property purchase does not work out. A common example is where someone buys a second home or investment flat intending to use it partly for short-term lets, but later discovers that a short-term let licence or planning consent is unlikely to be granted.

The key question is whether a quick resale changes the tax result. In most cases, it does not. If the property was bought as an additional dwelling rather than as a genuine replacement for the buyer’s only or main residence, the tax is generally not refundable simply because the plan failed and the property was sold again soon afterwards.

The Question

A buyer already owns and lives in a main home outside Scotland. They are considering buying a flat in Scotland to use for personal visits and, when not using it themselves, to let on a short-term basis. Because short-term let licensing and planning outcomes are uncertain, they want to know what happens if they buy the flat, apply for the necessary permissions, and then have to sell it within a few months if those permissions are refused.

The practical concern is the upfront tax cost. If ADS is due on the purchase, and ordinary LBTT is also payable, can either amount be repaid if the buyer later sells the flat because the intended short-term letting use cannot proceed?

Nick’s Explanation

Nick’s answer was that, on these facts, ADS would apply on the Scottish purchase because the buyer would still own their existing main home and the Scottish flat would not be a true replacement for that main residence.

He explained the point in substance as follows: the buyer has an existing home, plans to buy a Scottish flat for occasional personal use and hoped-for short-term letting, and would only sell the new flat if the licensing plan failed. That does not amount to replacing a main residence. As a result, ADS is due at purchase, and there is no refund mechanism simply because the second property is resold quickly after the short-term let licence is refused.

Nick also confirmed that the same basic problem applies to the underlying LBTT. In his words, LBTT is only repayable where a new property is being bought to replace the buyer’s previous main residence. If the property is being acquired as an additional property or investment property, a later resale does not create a repayment right just because the project no longer makes commercial sense.

The Law

Scottish LBTT is charged on land transactions under the Land and Buildings Transaction Tax (Scotland) Act 2013. ADS is an additional amount charged in certain cases where a buyer acquires an interest in a dwelling and, at the end of the effective date of the transaction, owns more than one dwelling and is not replacing their only or main residence.

The key rules for ADS are found in Schedule 2A to the Land and Buildings Transaction Tax (Scotland) Act 2013.

In broad terms:

• ADS is charged if a buyer purchases an additional dwelling.
• An exception can apply where the new dwelling replaces the buyer’s only or main residence.
• A refund may be available if the buyer purchases a new main residence before disposing of the old one, and then disposes of the old main residence within the statutory time limit.

That refund mechanism is tied to replacement of a main residence. It is not a general relief for any purchase that turns out badly, nor is it a relief for a failed investment plan.

Ordinary LBTT also does not become repayable merely because the buyer later changes their mind, cannot obtain a licence, or sells the property shortly after purchase. Tax is normally determined by the legal nature of the transaction at the effective date, not by whether the hoped-for use later succeeds.

Analysis

Applying those rules step by step:

1. The buyer already owns a main home.

2. They then buy a flat in Scotland.

3. The Scottish flat is intended to be an additional property: partly for personal use and partly for short-term letting if permission is obtained.

4. The buyer is not disposing of their existing main home as part of this transaction.

5. That means the Scottish purchase is not a replacement of their only or main residence.

6. Because it is an additional dwelling, ADS is chargeable on completion.

7. If the short-term let licence or planning position later goes against the buyer, and they sell the Scottish flat, that later sale does not convert the original purchase into a main-residence replacement.

8. So the later resale does not trigger an ADS refund.

9. For the same reason, the ordinary LBTT paid on the purchase is not repaid simply because the property is sold a few months later.

The important legal point is that the refund rules are specific. They are not based on hardship, failed expectations, or commercial disappointment. They depend on whether the statutory conditions for replacing a main residence are met.

In this scenario, the buyer’s reason for selling the new flat would be the failure of a short-term letting plan, not the disposal of a former main residence after moving home. That is why the taxes remain payable.

If a reader is also considering whether a property might avoid residential treatment because it is uninhabitable or not suitable for use as a dwelling, that is a separate issue with a high threshold. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the condition thresholds are now relatively high in “not suitable for use” cases. A property that is basically capable of residential use, even if unattractive or requiring work, may still be treated as a dwelling for tax purposes.

Outcome

On these facts, the practical answer is no. If a buyer purchases a Scottish flat as an additional property and later sells it because a short-term let licence is refused, that does not normally entitle them to a refund of ADS. It also does not normally entitle them to a refund of the ordinary LBTT paid on the purchase.

The only usual route to an ADS refund is where the transaction falls within the main-residence replacement rules. A failed short-term letting plan does not satisfy those rules.

Practical Steps

If you are weighing up a similar purchase, the sensible next steps are:

• Check whether the property would definitely count as an additional dwelling at the purchase date.

• Work through whether you are truly replacing your only or main residence, or merely buying a second home or investment property.

• Cost the transaction on the basis that ADS and LBTT may be fully irrecoverable.

• Review local short-term let licensing and planning policy before exchange of contracts or conclusion of missives, rather than assuming a licence will be available later.

• Consider whether the investment still works if permission is delayed or refused.

• Take specific Scottish tax advice before committing, especially if your living arrangements span more than one jurisdiction or if there is any argument about which home is your main residence.

Conclusion

Buying a Scottish flat for occasional personal use and hoped-for short-term letting will usually be treated as buying an additional dwelling if you keep your existing main home. If the short-term let plan later fails and you sell the flat, that quick resale does not by itself create a right to reclaim ADS or LBTT. The main-residence replacement rules are narrow, and they do not normally cover this situation.

Legal References Used

• Land and Buildings Transaction Tax (Scotland) Act 2013
• Land and Buildings Transaction Tax (Scotland) Act 2013, Schedule 2A
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

This page was last updated on 22 March 2026.

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