This is the third blog in our series looking at the new additional dwelling supplement (ADS) legislation. This week we look at the new provisions around single economic units and joint buyers. These changes will apply to purchases of homes in Scotland from 1 April 2024.

How to read this blog…

Due to the complexity of the new legislation for couples and joint buyers, any proper discussion of the law will be necessarily quite detailed and beyond the scope of a single blog.

I've therefore written two. This one is a general overview of the changes and an outline of their effects. It is written with general readers in mind.

If you are a lawyer, tax specialist or enjoy reading about complex legal issues in your spare time(!), please read this first and then check out the second blog, which outlines my technical analysis of the law and gives examples of the new rules in action.

What are the ADS Single Economic Unit rules?

These are rules designed to counter vanilla ADS planning.

Remember: for individuals the basic charge to ADS is triggered if, at the end of a day on which they buy a dwelling, that person owns two or more dwellings. If that were all, it would be simple for couples to avoid the tax – just gift all the "secondary" property to one party and have the other person carry out the purchase.

The single economic unit rules combat this by imputing ownership across spouses, civil partners, cohabitants, and parents with their minor children (together a single economic unit). If your wife/cohabitee/civil partner/eight-year-old owns a dwelling, you are deemed to own it too.

Why are the ADS Single Economic Unit rules changing?

Because they are – currently – very one-sided and this causes major issues for couples in some cases where property is unequally owned.

Under the current rules you only impute ownership from one member of an economic unit to the other for the purpose of counting whether they own two or more properties. No other reason. (There is a common misconception that ownership is imputed for all purposes – not so).

Here's a simple example:

Jimmy & Kim

Jimmy and Kim are a couple, but they live apart. Jimmy owns his main residence in his own name, and a share in a house he inherited from his late mother. Kim owns nothing and currently rents. They decide to buy a new house in joint names and will sell Jimmy's residence to fund the purchase. The sale and purchase complete on the same day.

Jimmy , at the time of purchase owns two dwellings – the new residence and his mother's house. The ADS would be triggered except for the fact that he's replacing his main residence which grants him an exemption. Kim also owns two properties for ADS purposes. She actually owns a share of the new house and is deemed to own a share of Jimmy's mother's house.

However, Kim is only treated as owning the old home for the purposes of the "two or more" test and not for any other reason. She's therefore not treated as disposing of a main residence and doesn't qualify for exemption. This means that the ADS is payable (since it is triggered by one buyer, the purchase is subject to the tax).

Therefore, in the absence of specific rules for this kind of situation (which do exist, but are inflexible), the couple would have to pay the ADS.

What is changing from 1 April 2024?

Roughly speaking (the technical position is more complex – check out the other blog to read more), from 1 April members of single economic units will be treated as though they have disposed of properties that have been disposed of by other members of their 'single economic unit'. In example 1, Kim would be treated as disposing of the property sold by Jimmy. This potentially opens up exemption from the ADS and ability to recover the ADS in more cases than before.

However, it doesn't help Jimmy and Kim. While Kim is treated as having disposed of Jimmy's home, she never lived in it as her main residence, so she doesn't qualify for exemption and the ADS charge still sticks.

What are the ADS Joint Buyer Rules?

Currently there are a number of these. The main ones to be aware of are:

  • If one joint buyer is liable for the ADS, all buyers are affected.
  • The "s48 principle" as established in the cases of Goudie and Crawford. To qualify for an exemption or repayment of the ADS, all joint buyers must qualify for the same head of exemption or repayment.
  • "Star-crossed lovers" rules. If a couple lives together but only one owns the old main residence and they buy a new one in joint names, the rules for exemption and recovery are extended in limited circumstances.

The way these rules fit together is complicated and can lead to unexpected outcomes – such as in the Crawford case, where two buyers who each owned and disposed of their own main residences were unable to recover the ADS because one of them sold on the day of purchase and the other sold afterwards.

How are the ADS Joint Buyer Rules Changing?

A new set of joint buyer rules will be introduced, which should add some much-needed flexibility to the exemption and recovery rules – but arguably not enough (see the technical blog for more information).

Under the new rules, the conditions for exemption or recovery are:

  • A prior main residence is disposed of in the 36 months before or after the purchase occurs;
  • It was a main residence in the 36 months before the purchase; and
  • The newly purchased property will be the main residence of all the buyers.

There are a couple of twists here.

First, the way these conditions are assessed changes depending on how many joint buyers own additional property.

  • If all joint buyers own additional property, then all buyers must be able to satisfy the conditions to exemption or recovery to be available.
  • If at least one of the joint buyers does not own additional dwellings, only one of the joint buyers needs to satisfy the first two conditions above. All joint buyers still need to live in the new property as their main residence.

Second, the new rules sit alongside (rather than replace) the existing joint buyer rules. The interaction with the single economic unit rules is also important. Crucially, the single economic unit rules do not apply when assessing how many buyers need to satisfy the conditions for exemption and repayment. In other words: when looking at how many buyers own additional property, you do not include property owned by other members of a buyer's single economic unit. 

For more detail on how this actually works, please see the technical blog. In the meantime, we can demonstrate how these apply to Jimmy and Kim.

Jimmy & Kim: Redux

The first thing to do is establish how many buyers need to meet the first two conditions for exemption. The answer is that only one does. Jimmy owns two properties – the new home and his mother's house. But Kim only owns one – the new home. She is not deemed to own Jimmy's mother's house as the single economic unit rules don't stretch that far.

Now we are in a better position. Jimmy meets conditions 1 and 2: he's sold his prior home on the date of purchase. Jimmy and Kim meet condition 3 together.

Therefore, exemption from the ADS is available to the couple and they will only pay ordinary LBTT.

Any closing thoughts?


  • These new rules are an improvement from the current law and the Scottish Government should be commended for trying to tackle the unfairness that they can produce.
  • However, they are extremely complex and difficult to analyse. It is possible that future reviews of the legislation can and should simplify them significantly.
  • For now, these new rules are not a cure-all. There are still danger zones. Especially for couples who live apart before living together. Again – see the technical blog for more information.

And if I want to know more? 

Our tax team would be delighted to discuss the new rules and how they could affect you. Feel free to contact me, Alan Barr or Isobel d'Inverno