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Property update: Land and Buildings Transaction Tax (LBTT)

16 March 2016 | tagged News release | Current issues

The below email was sent to residential property and personal tax solicitors today, 16 March 2016:

Land and Buildings Transaction Tax (LBTT) – The Additional Dwelling Supplement

Dear colleague,

We want to update you about some important changes brought about by the LBTT (Amendment) (Scotland) Bill.

The legislation will introduce a new LBTT additional dwelling supplement on purchases of additional residential properties in Scotland (such as buy-to-let properties and second homes) of £40,000 or more. The additional dwelling supplement is 3% of the total purchase price of an additional residential property purchase of £40,000 or more. Subject to Royal Assent being granted, the supplement will be payable from 1 April 2016.

We understand that the deadline will be putting pressure on you and your clients to complete transactions before the additional dwelling supplement becomes payable. If there is any possibility that the transaction will not complete by 31 March you should make your client aware of the risk of becoming liable to pay the supplement.

We strongly encourage you to read the Revenue Scotland Guidance which was published today, 16 March 2016, and also the FAQ materials.

Please give these changes careful consideration immediately so that you are aware of the scenarios where the additional dwelling supplement will apply.

For example:

  • In the scenario where a person already owns property (perhaps having inherited it) and intends to buy a first main residence, the additional dwelling supplement of 3% will be payable.
  • For purchases by ‘non-natural persons’ such as partnerships or companies, the "one dwelling rule" does not apply. The additional dwelling supplement applies to each and every purchase of a dwelling by a non-natural person.
  • The additional dwelling supplement might apply in purchases of dwellings by individuals if the spouse, civil partner, co-habitant or dependent child owns property because any dwelling which is owned by a buyer's spouse, civil partner, cohabitant or dependent child will be treated as being owned by the buyer him/herself.

In addition, please also note that there is no effective ’grace period‘, so any client who is moving home should be prepared to pay the tax if the sale of their main residence is delayed.

The client will be able to make a claim for the repayment of the additional dwelling supplement if the sale completes within 18 months. In these circumstances, please do not delay submitting an LBTT return, or registering a title to a purchase of property, in order to be able to treat the purchase of the new property as exempt from the additional dwelling supplement.

You should explain to your clients that there are aspects of the transaction which are to some extent beyond your control, for example, if you are still waiting for a mortgage offer or search results. It is important that you advise your clients as to the likelihood of their transaction completing before the end of the month.

When you have clients who are affected, whether directly or as a result of being in a chain of transactions, you should explain the risks and try to get specific written instructions as far as you are able.

If you have any queries or comments that you would like to put to the Law Society’s Tax Committee about these issues please do email Matthew Thomson at

Yours sincerely,

Isobel d’Inverno & Ross Mackay

Convener of the Tax Committee & Convener of the Property Law Committee

Law Society of Scotland

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