Part 6 of schedule 2A – Ownership of dwellings
Paragraph 11 of schedule 2A – What counts as a dwelling owned by a person?
55.Paragraph 11 clarifies that dwellings situated outside Scotland are to be counted for the purposes of schedule 2A, in particular paragraph 2. This ensures that a buyer’s property holdings throughout the world are taken into account when considering if the additional amount is payable on the purchase of a dwelling in Scotland, and not only those in Scotland or the rest of the UK.
56.Paragraph 11 also provides that an ownership interest in a dwelling with a market value of less than £40,000 is disregarded. This is relevant to properties owned other than the property being purchased as part of the chargeable transaction. The relevant date for whether an ownership interest has a value of £40,000 is the effective date of the chargeable transaction. In the case where the buyer is not selling an existing dwelling or dwellings, for example where they are not replacing their only or main residence, they must make a reasonable estimate of the market value of the ownership interest. This will have to be an estimate since in these circumstances the dwelling or dwellings are not on the market. The market value includes the market value of subordinate real rights pertaining to the ownership interest.
57.In the case of certain trusts and proper liferents, the deemed ownership interest would not have a market value because it cannot be sold. In those cases, sub-paragraph (6) and (7) provide that it is the market value of the dwelling that is relevant, having no regard to the economic impact of the trust or liferent interest. Again, this will have to be a reasonable estimate.
58.Paragraph 11 also provides that if a dwelling has been subject to the additional amount because the purchase of it was relevant to paragraph 3, then the dwelling is not relevant to paragraph 2. So, for example, an individual has a sole trade business of property trading, and the additional amount has been paid on the purchase of a dwelling by that business then it is not counted as being owned by the individual for the purpose of paragraph 2. Similarly if such a business purchases a property outside of Scotland, and that purchase would have been relevant to paragraph 3 had the dwelling been in Scotland, that property is not included as being owned by the individual for the purposes of paragraph 2.
59.Interpretative provisions of the 2013 Act relevant to Paragraph 11—
| “dwelling” | Part 6 of schedule 5 |
| “market value” | section 62 |
| what counts as a dwelling owned | Part 6 of schedule 2A. |
Paragraph 12 of schedule 2A – Deemed ownership: cases where title is not yet registered etc.
60.In Scots law, a buyer does not own a property until the change of ownership is registered in the Land Register. The corollary is that the seller is not divested of the title until that point(8).
61.Under the 2013 Act the tax point is known as the “effective date” and for a standard residential transaction is likely to be the date of settlement which is the date on which the buyer has paid the purchase price and receives the keys and a signed disposition from the buyer(9). At this point the buyer will for practical purposes consider themselves to be the owner of the property (they will be able to move in) and the seller (who will no longer have keys) will consider themselves to no longer be the owner. Paragraph 12 treats the practical position as a deemed ownership – or non-ownership – for the purposes of schedule 2A, notwithstanding the technical position of Scots law. This is particularly relevant for the purposes of paragraph 2 of schedule 2A and the question of how many dwellings the buyer “owns” at the end of the effective date.
62.For properties situated in the rest of the UK the appropriate definitions from UK Stamp Duty Land Tax legislation are imported in sub-paragraph (4); and for properties outside of the UK the same concepts are applied across and to be read according to the prevailing law and practice there. For jurisdictions that follow the civil law there is likely to be similarity to Scots law in terms of registration being key to transferring ownership; and for jurisdictions that follow the common law there is likely to be a similarity to English law in terms of which equitable or beneficial interests can transfer at the point of completion.
63.Interpretative provisions of the 2013 Act relevant to Paragraph 12—
| “buyer” | section 7 |
| “dwelling” | Part 6 of schedule 5 |
| “effective date” | section 63 |
| “subject-matter” | section 61. |
64.“Seller” takes its common sense meaning here and therefore would mean “vendor” in legal systems where that is the prevailing terminology. “Settlement” also takes its common meaning for the purposes of paragraph 12, and not the meaning in paragraph 20(1).
Paragraph 13 of schedule 2A – Deemed ownership: beneficiaries under certain trusts
65.Paragraph 13 concerns beneficiaries under bare trusts and certain other settlements, which are trusts other than bare trusts. In the case of a bare trust and a settlement having a relevant interest (as defined in paragraph 20) in trust property comprising a dwelling, the beneficiary will be treated as the owner of the dwelling for the purposes of considering whether the additional amount of LBTT applies to a chargeable transaction.
66.Interpretative provisions of the 2013 Act relevant to Paragraph 13—
| “bare trust” | paragraph 20(1) of schedule 2A |
| “dwelling” | Part 6 of schedule 5 |
| “relevant interest” | paragraph 20(3) of schedule 2A |
| “settlement” | paragraph 20(1) of schedule 2A. |
Paragraph 14 of schedule 2A – Deemed ownership: dwellings owned by trustees or personal representatives
67.Paragraph 14 provides that trustees and executors are not treated as owning dwellings in their care. But that does not affect that person being treated as owner for another reason – for example, where the person is a relevant beneficiary.
68.Interpretative provisions of the 2013 Act relevant to Paragraph 14—
| “personal representative” | section 65. |
Paragraph 15 of schedule 2A – Deemed ownership: long leases
69.Paragraph 15 deems the tenant’s interest in a long lease (a lease of more than 20 years) to be ownership. The landlord’s interest is not treated as ownership. Long residential leases are very uncommon in Scots law but some are still in existence and are to be counted, including some which are not (for technical reasons) “qualifying leases” (as mentioned in paragraph 3 of schedule 1 to the 2013 Act). Long residential leases are much more common in England and Wales and similar legal systems where the tenant’s interest is known as “leasehold”. Read with paragraph 18(2) where appropriate it is paragraph 15 which brings leasehold title within the meaning of ownership in schedule 2A. Tenancies which are short but of indefinite duration, such as the private residential tenancy under the Private Housing (Tenancies) (Scotland) Bill, are not to be treated as long residential leases.
Paragraph 16 of schedule 2A – Deemed ownership: proper liferents
70.Liferent is a formal arrangement where the liferenter is given the effective ownership and use of property for their lifetime. Scots law recognises two forms of liferent – the more common type constituted via trust (which is within paragraph 11) and “proper” liferent which is dealt with in paragraph 16. The liferenter’s interest is treated as ownership and the original owner and fiar’s interests are not treated as ownership. The fiar is the person who will become owner on the liferenter’s death.
Paragraph 17 of schedule 2A – Deemed ownership: joint owners and owners of shares
71.Paragraph 17 – which considers existing ownership – is separate to paragraph 5 of schedule 2A – which is relevant to a chargeable transaction – and applies even when the new purchase does not involve joint ownership or shares, so looks at the ownership of existing properties when consideration of the additional amount of tax applies.
72.A person might own a share in existing residential property through a “shared ownership” scheme, for example an 80% share with the other share being owned by a public authority or developer. A person might also own a part share for other reasons. Paragraph 17 treats such persons as if they were the 100% owner.
73.Interpretative provisions of the 2013 Act relevant to Paragraph 17—
| “dwelling” | Part 6 of schedule 5 |
| “jointly entitled” | section 65. |
Paragraph 18 of schedule 2A – Dwellings outside Scotland; what counts as “ownership”
74.Since schedule 2A takes a global view of a person’s property holdings, paragraph 18 maps the Scottish ownership interests to equivalent concepts in other jurisdictions. As mentioned, this has particular relevance to long residential leases which are uncommon in Scots law but are very common in England and Wales.
75.Interpretative provisions of the 2013 Act relevant to paragraph 18—
| “dwelling” | Part 6 of schedule 5 |
| what counts as a dwelling owned | Part 6 of schedule 2A. |
Section 50 of the Land Registration (Scotland) Act 2002 states: "Registration of a valid disposition transfers ownership; An unregistered disposition does not transfer ownership."
E-conveyancing is not at the time of writing widely adopted so these Explanatory Notes describe the Scottish conveyancing process according to the traditional paper-based process.
