Proposed changes to Scottish Land and Buildings Transaction Tax

The Scottish Government has published a draft Scottish Statutory Instrument to amend the Land and Buildings Transaction Tax (LBTT). There is to be a new exemption from LBTT for local authorities and various amendments are to be made to the additional dwelling supplement (ADS), which is the extra 6 percent LBTT paid in Scotland where, broadly, a residential property purchase is made by a company, or the purchased property is not an individual’s only residential property or is not acquired to replace their main residence. The amendments to the ADS are largely in line with expectations (there was a consultation on a previous draft of the legislation last year). 

The key amendment is that the time period within which a previous main residence must be sold in order for the replacement main residence to qualify as such is to be extended from 18 months before and after the new purchase, to three years before and after. However, unlike stamp duty land tax (SDLT), Revenue Scotland has no discretion to extend this period further where special circumstances delay the sale of the previous main residence.

Other amendments include the removal of ADS charges arising because property is inherited between exchange and completion of a residential purchase (thus making the purchase a second home); and where a couple has permanently separated but there is difficulty selling the former marital home (and hence a new purchase would be a second home that did not replace the old one).

The new exemption from LBTT for local authorities acquiring housing applies if the acquisition is grant funded or under specific statutory powers and puts them on a par with housing associations.

The new rules should take effect from 1 April 2024 once approved by the Scottish Parliament.

For further information please contact:

• Simon Yeo
• Michael Hope