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SECOND home buyers in Scotland need to factor another expense into their plans, after the Scottish Government’s recent introduction of a supplementary land and buildings transaction tax (LBTT) charge.

It was previously suggested the absence of an additional supplement in Scotland would make it more lucrative for investors to buy up housing stock in Scotland which would in turn make it more difficult for first time buyers to get a foot on the housing ladder.

It will of course also raise millions of pounds in revenue each year for the Scottish Government.

The “additional dwelling supplement” (ADS) applies to those buying a home in Scotland in addition to their main residence, so it’s worth knowing the ins and outs if you’re weighing up whether investing in another property is a viable option.

A main residence is usually where you live and spend most of your time, however legislative guidance published by Revenue Scotland states that an individual’s main residence may be where they spend less time.

This may be the case if this is where you keep most of your possessions, if you are married or in a civil partnership, if you’re registered with various organisations such as banks, building societies and the NHS, and if it’s closer to where your children go to school.

If your main residence is in Scotland but you decide to purchase a holiday home in Spain, the charge won’t apply, unless Spain has a similar supplementary tax in force.

On the other hand, anyone who has their main residence outside of Scotland will be charged ADS if they buy another home in Scotland. For example, if you live in Dubai and want to buy a holiday house in Scotland, the ADS will apply.

The 3% levy only applies to properties worth £40,000 or more – and it’s not only levelled at individuals, the charge also applies to companies and people acting as sole traders. Unfortunately for companies, the ADS is payable whether or not the company owns any other property.

If you buy a new home before selling your existing property you will face the tax, in addition to the standard LBTT payable on the purchase, – though the ADS can be reclaimed if you sell your old house within 18 months.

There are various exemptions in respect of LBTT and ADS which can be complex. Your solicitor will be able to provide detailed advice if required.

Joni Esson, Senior Associate

Chambers UK 2018

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