Land and Buildings Transaction Tax review: Scottish government policy evaluation 2025-2026

B1 – Background to the Additional Dwelling Supplement and Scope of Review

1. Introduced in 2016, the LBTT Additional Dwelling Supplement (ADS) is a flat‑rate, additional amount of tax which may be due as part of LBTT liabilities. It is payable when:

(i) the buyer purchases a residential property in Scotland and already owns one or more residential properties anywhere in the world; (ii) where there are two or more buyers, if any buyer already owns one or more residential properties anywhere in the world; and (iii) the buyer(s) are not replacing or selling their only or main residence.

2. The ADS will not apply if:

(i) the buyer owns only one dwelling at the end of the effective date; (ii) the purchase price is less than £40,000; (iii) the buyer’s additional property is valued at less than £40,000; (iv) the buyer’s interest in another property is a jointly owned share worth less than £40,000; or (v) the buyer disposes of their previous only or main residence in the 36 months before purchasing their new main residence.

3. The ADS can be reclaimed if:

(i) the previous main residence is sold within 36 months of the new property purchase; (ii) the property sold was the buyer’s only or main residence within the preceding 36 months; and (iii) the buyer has lived in their new main residence on which the ADS was paid.

4. For transactions with an effective date prior to 1 April 2024, the relevant timelines were 18 months.

5. As part of the LBTT review, the Scottish Government has considered Revenue Scotland’s operational perspective and the views of the LBTT review working group regarding whether and how to take account of “exceptional circumstances” in the context of the LBTT ADS. The review has not considered the role of exceptional circumstances within the broader LBTT legislation.

Comparative Arrangements

6. The Scottish Government has also considered the arrangements in place in comparator tax regimes in the rest of the UK.

7. With regard to this, Stamp Duty Land Tax (SDLT - England & Northern Ireland) provides a framework for exceptional circumstances under the higher rates for additional dwellings rules. HMRC may, at its discretion, extend the period within which a previous main residence must be sold to allow for a repayment to be claimed if the delay was genuinely unforeseen and prevented the sale.

8. Examples of accepted exceptional circumstances include Government‑imposed restrictions (e.g., COVID‑19 lockdowns) or public authority actions preventing sale.

9. HMRC guidance also sets out examples of situations that are not normally accepted as exceptional, such as: not being able to find a buyer at the desired price; delays in agreeing terms; or the breakdown of a property chain.

10. In Wales, The Land Transaction Tax and Anti‑Avoidance of Devolved Taxes (Wales) Act 2017 was amended in 2024 to extend refund and exception periods for the higher residential rate of Land Transaction Tax in defined circumstances. These include emergency restrictions (e.g., pandemic‑related measures) or Fire safety defects (e.g., cladding remediation delays).

Definitions

11. For the purposes of this review, the term “exceptional circumstances” is used as a broad, descriptive concept. It brings together a range of situations in which the interaction between individual or group circumstances and the current Additional Dwelling Supplement (ADS) rules may raise questions of fairness, proportionality, or alignment with the intended purpose of the legislation. The relevant circumstances for such situations are however not always “exceptional”.

12. Broadly speaking, the scenarios which have been considered concern either the relevant property itself, or circumstances which personally affect a taxpayer. Illustrative examples include:

• property‑related barriers to sale, such as cladding issues, reinforced autoclaved aerated concrete (RAAC), or emergency restrictions introduced by Government;
• welfare‑driven needs, including disability‑related acquisitions;
• individual hardship, such as serious illness or bereavement;
• transactional difficulties, such as a chain collapse; and
• domestic abuse, where urgent relocation may result in ADS becoming payable on a new property purchase.