LBTT (Additional Dwelling Supplement)

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    LBTT (Additional Dwelling Supplement)

    Hi. This is a copy of an email I sent the Law Society of Scotland but thought I would post it here to get other peoples take on it.
    .................................................. .....................
    I am looking for some independent advice regarding the newly published Land and Buildings Transaction Tax (Amendment) (Scotland) Bill, specifically regarding the Additional Dwelling Supplement (ADS) and whether I fall under the Transitional Provisions outlined in the Bill.

    12 months ago my wife and I reserved a new build property (100 GBP) with The house builder with a provisional settlement date of May/June 2016. After discussing the advantages and disadvantages of selling or renting our currently owned property we agreed to retain the property for Buy to Let purposes. The house builder were keen to conclude the missives in Q4 2015, however after discussing with my Solicitor and Mortgage Advisor we proposed entering into conditional missives with the house builder. The rationale for requesting conditional missives was because my Mortgage Provider only retain a Mortgage application for 6 months, therefore signing before January 2016 would mean it would have expired by the May/June settlement date.

    On 28th September 2015 The house builder advised my Solicitor via email they agreed to the conditional missives approach.
    On 3rd October 2015 I discussed the missives with my Solicitor and he agreed to go back to the house builder with proposed amendments.
    On 9th October 2015 I received a letter from my Solicitor advising the house builder had responded to the amendments with further qualifications/deletions
    On 13th October 2015 I discussed the qualifications/deletions outlined by the house builder with my Solicitor - I agreed to all amendments made to the missives by the house builder and signed the documents.
    On 16th October 2015 I sent a deposit totalling 2000 GBP to my Solicitor for the purchase of the property
    On 23rd October 2015 my Solicitor confirmed via email receipt of the deposit
    On 26th January 2016 a House Survey Report was published for the property - this was coordinated by my Mortgage Provider.
    On 23rd March 2016 I advised my Solicitor to purify the missives after signing the Mortgage Agreement

    Notes: The missives were purified on the same document which was entered into on October 3rd 2015. i.e. No new documents were created (to my knowledge) and no additional signatures were required from me.

    On 28th April 2016 a letter was dispatched by my Solicitor which I received on 30th April 2016. As well as enclosing a copy of the Completion Statement from the house builder, the letter also contained the following statement from my Solicitor.

    "We understand you intend retaining [Address of 2nd property] but this would involve you in a stamp duty payment and we will discuss this with you when you call"

    I believe what is being inferred in the above statement is that I would now be liable for the Additional Dwelling Supplement (ADS) which came into force on 1st April 2016.

    I have been unable to contact my Solicitor due to the Bank Holiday therefore I have spent this weekend analysing the law and would like your advice whether (based on the time-line I have provided above) I fall under the Transitional Provisions outlined as follows.

    Land and Buildings Transaction Tax (Amendment) (Scotland) Bill as Passed

    Part 7
    3 Transitional provision: application of this Act
    (1) This Act applies in relation to a chargeable transaction where—
    (a) the contract for the transaction was entered into on or after 28 January 2016, and
    (b) the effective date of the transaction is on or after the day on which section 1 comes into force.
    (2) For the purposes of this section, “chargeable transaction”, “contract” and “effective date” have the same meanings as in the Land and Buildings Transaction Tax (Scotland) Act 2013.

    I note that in Section 4 of the Law Society Stage 3 Briefing to all MSPs you define a transaction as having been entered into but not concluded as:

    Transitional Arrangements
    We believe that it would be inequitable to require a purchaser to pay the higher rate if he or she has sold his or her main residence prior to the announcement of the additional charge even if he or she buys a new main residence after 1 April 2016. Given Scottish conveyancing practice, we suggested that it would be more appropriate to consider transactions for transitional relief where an offer to buy has been made and accepted in principle (though missives not necessarily concluded) prior to 16 December 2015.

    Amendment at Stage 2
    Section 3(1)(a) of the Bill has been amended so that the supplement does not apply where the contract for the transaction was entered into before 28 January 2016, rather than before 16 December 2015 as originally proposed.

    The Society’s Position
    We welcome this amendment which recognises that purchasers would not have been aware of the details of the supplement until the Bill was published on 28 January 2016.

    I have also identified a couple of Transitional Arrangement examples which closely align to my situation

    2.03 Transitional arrangements

    Q: I am buying a holiday home in Skye. I already own the house that I live in in Falkirk and I do not plan to sell that house. The effective date of my new purchase will be the 3rd of April, 2016. Does this mean I will have to pay the Additional Dwelling Supplement?
    A: If you entered into your contract to buy the holiday home on or after 28 January, 2016, and the effective date of the transaction is on or after 1 April, 2016, the Additional Dwelling Supplement will apply. However, transitional provisions apply.The Bill to introduce the Additional Dwelling Supplement was published on 28 January 2016. Therefore, if you entered into the contract before 28 January 2016 you will not be liable to pay the supplement, whatever the effective date is

    Example 75: Transitional arrangements, contract entered into before 28 January 2016 Ralf already owns a main residence and enters into a contract to purchase a dwelling on 15 December 2015. Ralf will use this new dwelling for buy-to-let purposes. The effective date of the transaction is 3 April 2016.
    Although the effective date of the transaction is after 1 April 2016, as Ralf entered into a contract for the transaction before 28 January 2016, the ADS will not apply as it is covered by the transitional arrangements.

    Paying LBTT at a rate of 5% above 40,000 GBP rather than 2% above 145,000 GBP would mean a significant and unplanned overhead 3 weeks before my settlement date. I would appreciate any advice whether the details I have provided regarding the purchase of this property falls under the Transitional Arrangements/Provisions supported by the Law Society of Scotland and published in the Amended Land and Buildings Transaction Tax Bill in March.
    .................................................. .................

    Anyone able to advise/comment/provide their opinion on where they think I stand with this?


    In England and Wales, a property sale is entered by exchange of contract and exchange date before 25 Nov 2015 would allow buyer to escape the 3% Additional SDLT if completion date comes after 1 April 2016.

    In Scotland , it seems the contract must be exchanged before 28 Jan 2016 to escape the ADS after 1 April 2016. But we don't know if the conveyancing missive used in Scotland is equivalent to sale contract used in England and Wales.


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