Draft additional dwelling tax changes put out for views

Proposed changes to the additional dwelling supplement ("ADS") element of land and buildings transaction tax are being consulted on by the Scottish Government, as it responds to submissions received in a call for evidence last year.

Draft legislation published for views would extend the length of time a buyer moving between properties has to sell their original home and be allowed to reclaim the ADS. It would also leave out of account a low value share of a joint owner and introduce an exemption for divorced or separated people required by court order to keep their previous home.

In its response to representations received, the Government: 

• agrees to extend from 18 to 36 months the time allowed to people moving between properties and reclaim any ADS paid, bringing Scotland into line with the position south of the border under stamp duty land tax ("SDLT");
• agrees to disregard small shares in a property, from ADS consideration where the value of the share is less than £40,000, as respects both inherited and non-inherited property shares. It will also provide for relief where a property has been inherited after missives have been signed on a new property; however it has decided against a "grace period" such as exists under SDLT; 
• while believing it would be inconsistent relative to other buyers to allow full relief where a new main residence is purchased following divorce or separation, agrees to provide that a retained interest in a previous main residence which results from a court order or equivalent agreement related to divorce or separation is disregarded in determining whether ADS is due;
• will clarify the position regarding certain complexities when two or more people buy a property together;
• will extend relief from LBTT, and by consequence the ADS, for local authorities to cover a broad range of scenarios where affordable housing is acquired, but does not intend to amend the current tax treatment of housing co-operatives;
• does not intend to introduce an "exceptional circumstances" provision, but hopes the other proposed amendments will assist in many cases which might otherwise be considered "exceptional".

Public Finance Minister Tom Arthur said: "While the ADS operates well in the majority of cases, there are some circumstances where it could work better. These proposed amendments are intended to address a number of concerns which have been expressed and improve fairness."

He added: "The measures in this consultation are wide ranging and I encourage anyone with an interest to give us their feedback on the plans. We will consider all responses carefully before setting out our next steps."

Access the consultation here. The closing date for submissions is 5 April 2023.