On 1 April 2016, the Land and Buildings Transaction Tax Additional Dwellings Supplement (ADS) became payable on the purchase of an additional dwelling in Scotland and on the purchase of all dwellings by companies and other bodies.

The ADS is an additional LBTT charge of 3% which is charged on the total consideration for the property, and must be paid in addition to the normal rates of LBTT which are due within 30 days of the date of completion of the purchase. The rules on when the ADS is payable are not straightforward and catch more purchases than one would imagine. There are differing rules applicable to individuals, trusts, partnerships and companies.

Below is a summary of the rules and some examples of when the supplement will or will not be payable:

General Rules

  • ADS is only payable on a dwelling if the chargeable consideration for it is £40,000 or more. However once the £40,000 threshold is crossed the entire consideration attributable to the dwelling is taxed at 3%.
  • The ADS will apply regardless of whether the transaction is subject to LBTT at the residential or non-residential rates. For example, the purchase of an estate consisting of substantial farm lands, an estate house and three cottages will qualify as a mixed purchase and LBTT will be chargeable on the entire price at the non-residential rates. However, the price attributable to the house and cottages will also bear an additional 3% LBTT due to the ADS.
  • This is different from the equivalent SDLT higher residential rates (which also came in to force on 1st April 2016), which are only applicable to transactions that are taxed as residential purchases.

Companies, non-individuals and businesses

  • Companies, partnerships, collective investment vehicles, individuals buying in the course of a business, and wholly discretionary trusts will be subject to the ADS on any purchases of dwellings (unless a relief applies) even if they are buying their first and only dwelling.


  • Individuals (except those buying in the course of a business) will be subject to the ADS if they already own (or are treated as owning) another dwelling anywhere in the world with a value of at least £40,000.
  • Beneficiaries of bare trusts, or beneficiaries with an interest in possession, are treated as owning any dwellings held in trust. Individuals are treated as owning any dwellings owned by their spouses, civil partners or cohabitants, or their minor children.
  • For example, an individual buying their first home for £200,000 also owns a buy-to-let property jointly with their four siblings in equal shares. The buy-to_ let is valued at £150,000. The individual will not be subject to the ADS on the purchase of their home as their interest in the buy-to-let is only worth £30,000.
  • There is an exemption for individuals buying a new home to replace an existing main residence. To qualify, the individual must effectively have sold their existing residence no later than 30 days after buying their new home. "Accidental" second home owners who do not sell their previous home in time will be liable for the ADS at the time of purchase, but will be able to reclaim it if they do sell their previous home within 18 months.
  • An individual buying an additional residential property for a member of their family, such as a sibling or a non-dependent child, will be liable to pay the supplement unless title to the additional property is taken in the name of the family member. This does not apply, however, in cases where a parent buys in the name of a child under the age of 16 _ this is treated as a purchase by the parent.

Reliefs and exemptions

  • There is a specific relief from the ADS for portfolio purchases of six or more dwellings as part of single or linked transactions. To qualify for the relief, all properties must be in Scotland, so care should be taken with cross border portfolios as properties south of the border cannot be counted. The relief does not take account of an existing portfolio: a purchaser who already owns five dwellings and buys two more will be subject to the ADS on that purchase.
  • The same exemptions and reliefs which apply to LBTT generally apply to the ADS so, for example, the transfer of a house through succession or in divorce proceedings would not trigger the ADS. Similarly, the ADS will not apply to a transaction which qualifies for group relief or charities relief, though it would apply if the relief was subsequently withdrawn.
  • The ADS must also be taken into account when calculating LBTT multiple dwellings relief (MDR), which applies to purchases of two or more dwellings. Where fewer than six dwellings are purchased, the ADS can apply and MDR may be available to offset some of the additional tax. Where six or more dwellings are purchased, the ADS will not apply and MDR can still be claimed. When an individual is claiming MDR, but also replacing a main residence, then ADS will only apply to those properties that are not replacement residences, and MDR will apply in full.
  • This is different from the position under SDLT. If MDR is being claimed, then the higher residential rates of SDLT will automatically apply with no relief for portfolio purchases.
  • The LBTT partnerships rules apply to some transfers into, and out of, partnerships by partners. Although they are not a relief, the partnerships rules can ameliorate the effect of the ADS on certain transactions. Specific advice should always be taken when transferring properties to or from a partnership.

The above summary is not a comprehensive guide and advice should be obtained when an additional residential property is being acquired by an individual, or when a non-natural person is acquiring its first or any subsequent residential property.

For further information please get in touch with Johane Murray, or your usual Brodies contact.


Johane Murray

Head of Real Estate & Partner