Revenue Scotland LBTT: Guide to Completing LBTT Returns and Paying Additional Dwelling Supplement (ADS)

ADS Return, Payment and Amendments

This section provides guidance on submitting a Land and Buildings Transaction Tax (LBTT) return and paying the Additional Dwelling Supplement (ADS) in Scotland. Key principles include:

• A return must be made to Revenue Scotland within 30 days of the transaction’s effective date.
• The buyer is responsible for calculating and paying any LBTT due when submitting the return.
• Details of the ADS must be included in the LBTT return, with payment made alongside any LBTT due.

Understanding the Additional Dwelling Supplement (ADS) and Land and Buildings Transaction Tax (LBTT) in Scotland

In Scotland, when purchasing property, buyers may encounter the Land and Buildings Transaction Tax (LBTT) and the Additional Dwelling Supplement (ADS). These taxes are vital for property transactions, and understanding them is essential for anyone involved in buying property. This article provides a comprehensive overview of LBTT and ADS, explaining their application, calculation, and payment processes.

What is LBTT?

The Land and Buildings Transaction Tax (LBTT) is a tax applied to residential and non-residential property transactions in Scotland. It replaced the UK-wide Stamp Duty Land Tax (SDLT) in April 2015. LBTT is designed to be more progressive, meaning that the amount of tax payable increases with the property’s value.

How LBTT Works

LBTT is calculated based on the purchase price of the property. It operates on a tiered system, where different portions of the property price are taxed at different rates. For example, if you buy a house for £300,000, the tax is calculated as follows:

• The first £145,000 is taxed at 0%.
• The next £105,000 (from £145,001 to £250,000) is taxed at 2%.
• The remaining £50,000 (from £250,001 to £300,000) is taxed at 5%.

To see the current rates and thresholds, visit the Revenue Scotland LBTT page.

What is ADS?

The Additional Dwelling Supplement (ADS) is an extra charge on top of LBTT for those purchasing additional residential properties. This typically applies to buy-to-let investors or those buying second homes. The ADS aims to make property ownership fairer and discourage speculative purchases that can drive up prices.

How ADS Works

ADS is charged at a flat rate of 4% on the total purchase price of an additional property. For example, if you purchase a second home for £200,000, the ADS would be £8,000 (4% of £200,000).

It’s important to note that ADS is payable in addition to any LBTT due. Therefore, buyers must calculate both taxes when purchasing an additional property.

Making an LBTT Return

When a property transaction is notifiable for LBTT, a return must be submitted to Revenue Scotland. This return must be made within 30 days of the transaction’s effective date. The buyer is responsible for calculating and paying any LBTT due at the time of submitting the return.

For transactions involving ADS, the details of the additional charge must be included in the LBTT return. Payment for ADS should be made alongside any LBTT payment.

Steps to Submit an LBTT Return

1. Calculate the LBTT and ADS (if applicable) due on the property purchase.
2. Complete the LBTT return form, ensuring all details are accurate.
3. Submit the return to Revenue Scotland within 30 days of the transaction’s effective date.
4. Make the payment for LBTT and ADS at the time of submission.

For more detailed guidance on submitting an LBTT return, visit the Revenue Scotland guidance page.

Amendments and Refunds

There may be situations where amendments to an LBTT return are necessary. For example, if there is a change in the transaction details or if an error was made in the original submission. Amendments can be made by submitting a revised return to Revenue Scotland.

Refunds of ADS

In certain circumstances, buyers may be eligible for a refund of the ADS. This typically occurs if the buyer sells their previous main residence within 18 months of purchasing the additional property. To claim a refund, the buyer must apply to Revenue Scotland, providing evidence of the sale of the previous main residence.

For more information on amendments and refunds, visit the Revenue Scotland amendments page.

Common Scenarios Involving LBTT and ADS

Buying a First Home

First-time buyers purchasing a property in Scotland are subject to LBTT but not ADS, as they are not buying an additional property. They can benefit from the first-time buyer relief, which increases the 0% tax threshold to £175,000.

Buying a Second Home

When buying a second home, both LBTT and ADS apply. The buyer must calculate the total tax due, considering both the tiered LBTT rates and the flat 4% ADS rate.

Replacing a Main Residence

If a buyer is replacing their main residence, they may initially pay ADS on the new purchase. However, if they sell their previous main residence within 18 months, they can apply for a refund of the ADS paid.

Conclusion

Understanding LBTT and ADS is essential for anyone involved in property transactions in Scotland. These taxes can significantly impact the cost of buying property, especially for those purchasing additional homes. By familiarising yourself with the calculation and payment processes, you can ensure compliance and potentially save money through available reliefs and refunds.

For further information and detailed guidance, visit the Revenue Scotland LBTT page.

Useful article? You may find it helpful to read the original guidance here: Revenue Scotland LBTT: Guide to Completing LBTT Returns and Paying Additional Dwelling Supplement (ADS)

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