Joint Buyers and Additional Dwelling Supplement (ADS) Rules Explained for Property Transactions
LBTT Additional Dwelling Supplement for Joint Buyers
When two or more people buy a home together in Scotland, the LBTT Additional Dwelling Supplement (ADS) is worked out by looking at all buyers together. If one joint buyer already owns another dwelling and is not replacing their main home, ADS can apply to the whole purchase. Since 1 April 2024, some repayment rules have become more flexible, but repayment is still not automatic.
- Each joint buyer is treated as an owner of the new dwelling for ADS purposes, even if their share is small or they are only beneficially entitled.
- If one joint buyer owns more than one dwelling at the effective date and is not replacing their previous main residence, ADS may apply to the entire transaction.
- A first-time buyer or another buyer who has sold their old home does not prevent ADS if another joint buyer still triggers it.
- If one buyer is a non-individual, ADS generally applies to any residential purchase, except in certain trust cases.
- For transactions on or after 1 April 2024, a dwelling may be ignored when counting ownership if the buyer’s share is worth less than £40,000.
- For repayments from 1 April 2024, one buyer may meet the sale and previous-main-residence conditions for the group, but all buyers must live in the new home as their main residence and repayment can still be blocked if all buyers keep other dwellings.
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Read the original guidance here:
Joint Buyers and Additional Dwelling Supplement (ADS) Rules Explained for Property Transactions
LBTT Additional Dwelling Supplement and joint buyers
This page explains how the LBTT Additional Dwelling Supplement (ADS) works when two or more people buy a dwelling together. The joint buyer rules are important because one buyer’s existing property ownership can affect the tax position for everyone in the purchase. The rules also changed for certain repayment claims from 1 April 2024.
What this rule is about
ADS is the extra LBTT charge that can apply when a residential purchase is an additional dwelling purchase rather than a straightforward replacement of a main home.
Where there are joint buyers, the law does not look at each buyer in isolation. Instead, each person who is jointly entitled to the dwelling is treated as an owner of the dwelling. That is so even if their share is small. It also applies where a person has a right to ownership but legal title has not yet been taken.
This matters because, for ADS purposes, each joint buyer is treated as a buyer in the transaction. If the conditions for ADS are met for one joint buyer, that can make the supplement apply to the whole transaction.
What the official source says
The official guidance says that where two or more people buy a dwelling jointly, each jointly entitled buyer is treated as owning the dwelling. The rule is not limited to spouses, civil partners, or couples. It can apply equally to siblings, friends, or any other joint purchasers.
If, at the end of the effective date of the transaction, one or more joint buyers owns more than one dwelling, ADS applies unless the main residence of each joint buyer who owns more than one dwelling is being replaced.
In practical terms, this means:
- if one joint buyer already owns another dwelling and is not replacing their previous main residence, ADS can apply to the whole purchase;
- it does not help that another joint buyer is a first-time buyer or has sold their own previous main residence, if another buyer still brings the transaction within ADS;
- where one joint buyer is a non-individual, ADS automatically applies to every residential transaction, apart from certain trust cases mentioned elsewhere in the guidance, and the main residence replacement rules do not apply.
The source also says ADS does not apply where a person acquires a further share in a property they already jointly own. Even so, the transaction may still be notifiable and may still attract ordinary LBTT if consideration is given or debt is assumed.
For transactions with an effective date on or after 1 April 2024, a dwelling is ignored when counting dwellings owned if the buyer’s share in it is worth less than £40,000.
The source further explains that the repayment rules for joint buyers changed from 1 April 2024. Before that date, the position was stricter. From that date, only one joint buyer needs to satisfy certain disposal and previous-main-residence conditions, but all buyers must satisfy the condition that the newly purchased dwelling has been occupied as their only or main residence. There is also an extra condition which can require all buyers to satisfy the full repayment conditions if each of them still owns other dwellings.
What this means in practice
The main practical point is simple: a joint purchase is tested by looking at all the buyers together, and one buyer’s property portfolio can trigger ADS for all of them.
If A and B buy together, and A owns no other dwelling but B already owns another dwelling that B is keeping, the purchase can still be an ADS purchase. A does not escape the supplement just because A personally is not buying an additional dwelling.
The replacement of a previous main residence is also looked at carefully. If joint buyers each own a previous main residence, the guidance says ADS will not be avoided unless each relevant buyer has replaced their previous main residence by the effective date.
That is why a purchase can attract ADS even where one buyer has sold their old home, if another buyer has not.
The repayment position now needs to be split into two periods:
- for transactions up to and including 31 March 2024, all joint buyers generally had to satisfy the repayment conditions;
- for transactions on or after 1 April 2024, the rules are more flexible, but not in every case.
From 1 April 2024, one buyer can satisfy the disposal condition and the previous-main-residence condition for the group, provided all buyers occupy the new dwelling as their only or main residence. But if each joint buyer still owns other dwellings apart from the new one, the additional condition means all buyers may still need to meet the repayment conditions before a repayment is available.
How to analyse it
A sensible way to analyse a joint buyer ADS question is to work through these points in order.
- Who are the buyers? Check everyone who will be jointly entitled to the property, not just who is contributing most of the money.
- Is any buyer a non-individual? If yes, the source says ADS automatically applies to every residential transaction, apart from certain trust cases.
- What dwellings does each buyer own at the end of the effective date? Include jointly owned dwellings, because each joint owner is treated as an owner.
- For transactions on or after 1 April 2024, does any relevant share have a value below £40,000? If so, that dwelling may not count.
- If a buyer owns more than one dwelling, are they replacing their previous main residence by the effective date? If not, ADS is likely to apply.
- If ADS applies initially, can it later be repaid? That depends on the transaction date and whether the statutory repayment conditions are met.
- For a repayment claim on or after 1 April 2024, has at least one buyer disposed of a previous main residence within 36 months, and was that dwelling that buyer’s only or main residence within the 36 months ending with the effective date?
- Have all buyers occupied the new dwelling as their only or main residence?
- Do any of the buyers still own other dwellings? If all buyers still own other dwellings, the extra condition may prevent repayment unless all of them meet the full conditions.
This last point is important. The source material shows that, even after the 1 April 2024 change, a repayment may still be blocked if another buyer continues to own an additional dwelling that keeps the transaction within ADS territory.
Example
Illustration: Red owns House 1 and lives there. Green rents and owns no dwelling. Red and Green buy House 2 together as their new home, but Red has not yet sold House 1.
At the end of the effective date, Red owns two dwellings and has not yet replaced their previous main residence. Under the joint buyer rules, ADS applies to the joint purchase of House 2.
If the transaction is on or after 1 April 2024, and Red sells House 1 within 36 months, a repayment may be available if:
- Red’s sale satisfies the disposal and previous-main-residence conditions; and
- both Red and Green occupy House 2 as their only or main residence.
On the source material, that repayment can be made because only one buyer needs to satisfy the disposal-related conditions, and Green does not own another dwelling.
But if Green also owned another dwelling and kept it, the extra condition could prevent repayment unless the full conditions were met by all buyers.
Why this can be difficult in practice
These rules are easy to get wrong because the tax result does not always match what buyers expect commercially.
Common points of difficulty include:
- assuming a first-time buyer in a joint purchase is tested separately;
- forgetting that a small joint share can still count as ownership;
- confusing legal title with beneficial or other entitlement to ownership;
- missing the special rule for non-individual buyers;
- applying the post-1 April 2024 repayment rules to earlier transactions, even though the change is not retrospective;
- assuming that if one buyer sells a previous main residence, repayment must follow.
The source examples also show that the repayment analysis can be more complicated than the initial charge analysis. A transaction may clearly attract ADS on day one, but whether it can later be reclaimed depends on who sold what, when they sold it, whether the old dwelling was their only or main residence, whether all buyers live in the new dwelling as their main home, and whether any buyer still owns another dwelling that keeps the additional dwelling position alive.
Another fact-sensitive issue is valuation of a share for the under-£40,000 rule from 1 April 2024. The source states the rule, but the practical valuation exercise may require careful evidence in real cases.
Key takeaways
- In a joint purchase, each joint buyer is treated as a buyer and as an owner of the dwelling, even if their share is small.
- If one joint buyer brings the transaction within ADS, the supplement can apply to the whole purchase.
- For transactions on or after 1 April 2024, repayment rules for joint buyers are more flexible, but repayment is still not automatic and can be blocked if other dwellings remain owned.
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Useful article? You may find it helpful to read the original guidance here: Joint Buyers and Additional Dwelling Supplement (ADS) Rules Explained for Property Transactions
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