Second Scottish Coronavirus Bill extends ADS time limit for Scottish homeowners to sell their old main residence to 36 months
By Justine Riccomini, Head of Taxation (Scottish Taxes, Employment and ICAS Tax Community)
21 May 2020
Justine Riccomini explains the temporary extension to the Additional Dwelling Supplement in Scotland.
The problem
The global pandemic has brought the Scottish housing market to an abrupt halt. When moving house, some people will buy a new home first; then sell their old one.
In Scotland, the tax implications are that if a person owns two properties at the date of the new purchase they will be liable to Land and Buildings Transaction Tax Additional Dwelling Supplement at 4% of the new purchase. The ADS can be reclaimed – when the old home is sold - but subject to this sale being within 18 months of the new purchase.
If, however, coronavirus intervenes and the housing market is effectively shut, will the old property be sold in time to qualify? This has led to an amendment being put forward.
The second Scottish Coronavirus Bill
The Coronavirus (No 2) (Scotland) Bill, in Schedule 4, contains an extension to the existing 18 month time limit by which the old main residence must be sold – the time period is to be extended by a further 18 months.
The legislation
The reprieve
The key points are:
- those whose effective date of purchase was between 24 September 2018 and 24 March 2020 and paid ADS now have 36 months in which to sell their old main residence.
- the draft legislation also facilitates two regulation making powers to:
- further extend the 36-month period by secondary legislation, and
- amend the period of 24 September 2018 to 24 March 2020.
- if necessary and where the circumstances have been triggered by the pandemic, the legislation is expected to be passed by the Scottish Parliament in the next week.
ADS Repayment Claims
Following operational changes due to COVID-19, ADS repayment claims can now only be made online – paper claims are no longer accepted. Note that:
- Agents can claim through the online LBTT system, SETS
- Taxpayers (and agents claiming more than 12 months after the filing date) can claim using the new online repayment claim form and e-mailing it to lbtt@revenue.scot
The new online form can be found here.
ADS can be reclaimed either by amending the return within 12 months after the filing date or by making an overpayment relief claim within 5 years of the filing date. It is worth bearing in mind that replacement of main residence relief can only be claimed where seller(s) have occupied the house which is sold as their main residence at some point in the 18 months before the purchase of the new house.
Conclusion
The inclusion of this provision in the second coronavirus Bill is welcome news. Time will tell as to how many householders need to avail themselves of it. At present, we understand that this is in the hundreds.
Have an opinion on this? Let us know at tax@icas.com