Provision has been made in this year’s Scottish Budget to increase Additional Dwelling Supplement (ADS) from 3% to 4% from 25 January 2019. What is ADS and how could it affect separating spouses and separating partners who are hoping to buy a new home?

Land and Buildings Transaction Tax (LBTT) replaced UK Stamp Duty Land Tax (SDLT) in Scotland from 1 April 2015. Like Stamp Duty, LBTT is a tax applied to transactions including the purchase of residential property. 1 April 2016 saw the introduction of the Additional Dwelling Supplement (ADS) which is payable in addition to LBTT. ADS is payable mainly on the purchase of second homes and buy-to-let properties. ADS may also be payable, however, when one spouse or partner decides to move out of the matrimonial or family home and buy a new property before disposing of their share or waiving any interest in their former home. In theory, ADS is not payable where a person is replacing their principal residence but, if the new residence is purchased first, the ADS will have to be paid within 30 days of purchase and the purchaser will only be able to reclaim this if the original residence is sold or transferred within 18 months.

In the current economic climate spouses and cohabitants who have separated may have no viable option but to remain under the same roof for extended periods. Some, for tactical reasons, may be unwise to move home until they have resolved their financial and property issues while others who have reached agreement may be forced to live at the same address due to a lack of resources while their home is marketed for sale.

However uncomfortable it may be to remain under the same roof after separation, family law advice should be obtained in relation to all of the family law issues including any liability to ADS before committing to a new purchase. Those who rush in may find that they will not be able to reclaim ADS if matters are not resolved within 18 months of the purchase.