Proposed Changes to ADS

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There's some good news for those currently affected by the Additional Dwelling Supplement here in Scotland. But what does it mean?

For those people that don’t already know, the Additional Dwelling Supplement (or ADS) was introduced in 2016 and is a tax on property buyers of 3% of the purchase price and is in addition to any LBTT (the Scottish Stamp Duty) payable.

Although the justification for the ADS was to curb people from buying investment properties the effect of the ADS turned out to be much more far reaching than that and many more people are affected than you might imagine.

And has the ADS fulfilled its goal of fewer people investing in second properties?

It might have done but certainly reports indicate that much less revenue has been generated than the Scottish Parliament had anticipated.

Thankfully however the Scottish Parliament has seen some sense and is hopefully about to add a relief to ADS which will affect quite a few couples in the future.

At present, ADS (that is 3% of the purchase price as a tax) is payable in the following example:

Mr and Mrs Smith are married but the marital home (their main residence in ADS parlance) is owned in the sole name of Mr Smith. They wish to buy their new home in joint names but Mrs Smith owns an investment property. Because Mrs Smith is not a co-owner of the marital home and owns an investment property it means that when Mr & Mrs Smith purchase their new home (main residence) the ADS will be payable.

That is perhaps not a common example but a more common example would be where Mr Smith and Miss Brown decide to move in with one another and live in the flat owned solely by Mr Smith and Miss Brown, who owned the flat she lived in, decides to rent it out. Again, when this couple come to sell Mr Smith’s flat and buy a new home in their joint names, ADS would currently be payable.

As I said above, thankfully the Scottish Parliament are proposing to change this so that on or after 30 June 2017 if spouses, civil partners or co-habitants jointly buy a dwellinghouse but the house being replaced is owned by only one of them, no ADS will be payable.

This is just a proposal at the moment but hopefully the Scottish Parliament will approve the changes. For those keen to see the real thing then the draft order being proposed by the Scottish Parliament can be viewed here.

For more information about ADS, visit the Revenue Scotland website.

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