Revenue Scotland LBTT: Understanding ADS Rules for Multiple Property Transactions in Scotland

ADS Rules for Particular Transactions and Buyers

This section explains the Additional Dwelling Supplement (ADS) rules applicable to specific transactions and buyers. The ADS is relevant when a buyer, or any individual in a group of buyers, owns two or more dwellings at the end of the transaction day and is not replacing their only or main residence.

• ADS applies to buyers owning multiple dwellings.
• Effective when not replacing the main residence.
• Relevant for transactions involving multiple buyers.
• Focuses on the effective date of the transaction.

Understanding the Additional Dwelling Supplement (ADS) in Scotland

The Additional Dwelling Supplement (ADS) is an important aspect of the Land and Buildings Transaction Tax (LBTT) in Scotland. It applies when individuals purchase additional residential properties. This article will explore the key aspects of ADS, including when it applies, how it is calculated, and some examples to help clarify its application.

What is the Additional Dwelling Supplement (ADS)?

The ADS is a tax applied to the purchase of additional residential properties in Scotland. It is an extra charge on top of the standard LBTT rates. The purpose of ADS is to discourage the purchase of additional homes, which can drive up property prices and reduce availability for first-time buyers.

When Does ADS Apply?

ADS applies when an individual or a group of buyers purchase a second residential property and already own one or more properties. It is important to note that ADS does not apply if the buyer is replacing their main residence. The key criteria for ADS to apply are:

• The buyer owns two or more residential properties at the end of the day of the transaction.
• The buyer is not replacing their only or main residence.

For more detailed guidance on when ADS applies, you can visit the Revenue Scotland website.

How is ADS Calculated?

The ADS is calculated as a percentage of the purchase price of the additional property. As of the latest update, the ADS rate is 4%. This means that if you purchase an additional property for £200,000, the ADS would be £8,000 (4% of £200,000).

It is important to factor in ADS when budgeting for the purchase of an additional property, as it can significantly increase the overall cost.

Examples of ADS Application

Example 1: Buying a Second Home

John owns a flat in Edinburgh and decides to buy a holiday home in the Highlands. The purchase price of the holiday home is £150,000. Since John will own two properties after the purchase and is not replacing his main residence, ADS applies. The ADS for this transaction would be £6,000 (4% of £150,000).

Example 2: Replacing a Main Residence

Sarah owns a house in Glasgow and is buying a new home in Dundee to replace her main residence. She sells her Glasgow house on the same day she buys the Dundee property. In this case, ADS does not apply because Sarah is replacing her main residence.

Example 3: Joint Purchase

Emma and Tom, who are not married, decide to buy a property together. Emma already owns a flat, but Tom does not own any property. The purchase price of the new property is £300,000. Since one of the buyers (Emma) will own two properties after the purchase, ADS applies. The ADS for this transaction would be £12,000 (4% of £300,000).

Exemptions and Reliefs

There are certain situations where ADS may not apply, or reliefs may be available. For example, if you sell your previous main residence within 18 months of buying a new main residence, you may be eligible for a refund of the ADS paid.

For more information on exemptions and reliefs, visit the Revenue Scotland website.

Conclusion

The Additional Dwelling Supplement is an important consideration for anyone looking to purchase additional residential properties in Scotland. Understanding when it applies and how it is calculated can help you make informed decisions and avoid unexpected costs. Always consider seeking professional advice if you are unsure about your specific situation.

For further information and guidance on ADS, you can explore the resources available on the Revenue Scotland website.

Useful article? You may find it helpful to read the original guidance here: Revenue Scotland LBTT: Understanding ADS Rules for Multiple Property Transactions in Scotland

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