1. Overview and Aims
1.1 Land and Buildings Transaction Tax (LBTT) is a tax applied to land transactions (including commercial leases) in Scotland. It is administered by Revenue Scotland, with support from Registers of Scotland (RoS).
1.2 The Additional Dwelling Supplement (ADS) was introduced in Scotland from 1 April 2016, in response to the UK Government's planned introduction from the same date of Higher Rates for Additional Dwellings (HRAD) to Stamp Duty Land Tax (SDLT) in England, Wales and Northern Ireland. A similar arrangement was subsequently introduced as part of the Land Transaction Tax (LTT) in Wales in April 2018.
1.3 The ADS applies, in general terms, when a buyer, or more than one buyer, purchases a property which results in them owning more than one residential property, and they are not replacing their main residence. It is an additional amount of LBTT, charged at 4% of the relevant consideration for a transaction where the total purchase price of an additional dwelling is £40,000 or more. The relevant consideration for these purposes is the chargeable consideration for the property.
Aims of this Call for Evidence and Views
1.4 The ADS forms part of the Scottish Government's drive to protect and support opportunities for first-time buyers in Scotland, reinforcing the progressive approach in place for LBTT rates and bands. It also raises vital revenue to support public services in Scotland. Furthermore, with similar tax arrangements in place across the UK (the HRAD in SDLT and Higher Rates of LTT), the absence of the ADS could have a destabilising impact on the Scottish property market. As such, it is an important element of the overall LBTT arrangements, and the Scottish Government intends for it to continue.
1.5 The available evidence indicates that the ADS operates well in most circumstances. However, taxpayers and stakeholder organisations have raised concerns about the way in which the legislation works in some specific circumstances. As examples, concerns have been raised about the timelines, the application of the ADS in various joint buyer scenarios, the way in which the "economic unit" provisions may apply and the treatment of purchases following inheritance or after a divorce or separation.
1.6 In light of this, the Scottish Government committed to undertake a review of the ADS in the 2021-22 Programme for Government.
1.7 This 12 week call for evidence and views represents the first step in the review. The Scottish Government wants to hear from taxpayers, stakeholder organisations and anyone with an interest in tax in order to:
- build a clear and shared understanding of all the issues of concern with the ADS;
- develop a stronger evidence base regarding the case for change; and
- identify any proposals for legislative amendments which could address the issues of concern.
1.8 Views and evidence are also sought on whether there are issues in relation to the ADS affecting different parts of Scotland which should be considered. The Scottish Government recognises that housing market access and performance in Scotland can vary significantly by area and that there may, for example, be particular concerns about the ADS in remote and rural areas.
1.9 Whilst this process is intended to be wide-ranging, views are not sought on whether the ADS should continue, or on the specific rate at which it should be charged.
1.10 In addition to inviting written responses, the Scottish Government intends to arrange virtual events with stakeholders and other interested parties over the next 12 weeks to discuss the ADS in more detail.
1.11 The review of the ADS will be taken forward on a phased basis, reflecting the processes and principles in the Scottish Government's Framework for Tax.
1.12 Following the end of the 12 week period, the Scottish Government will publish, in early summer 2022, an analysis of responses to this document and outline next steps in the process of the review.
1.13 We will carefully consider all available evidence and responses, taking account of the tax decision-making matrix set out in Chapter 5. If a need for change is identified, a further consultation on any proposed legislative amendments will be published.
1.14 In the event that legislative changes are ultimately proposed, the Scottish Government does not intend for these to have retrospective effect.