Background
3.The Act gives retrospective effect to the amendments made to the Land and Buildings Transaction Tax (Scotland) Act 2013 (“the 2013 Act”) by the Land and Buildings Transaction Tax (Additional Amount-Second Homes Main Residence Relief) (Scotland) Order 2017 (“the 2017 Order”). Under the 2013 Act, as amended through the Land and Buildings Transaction Tax (Amendment) (Scotland) Act 2016 (“the 2016 Amendment Act”), an additional amount of Land and Buildings Transaction Tax (“LBTT”) is chargeable in respect of certain transactions relating to second homes(1). This came into effect on 1 April 2016. It applies to transactions where the contract for the transaction was entered into on or after 28 January 2016 (the date when the Act for the 2016 Act was introduced in the Parliament) and for which the effective date (usually the date of settlement) was on or after 1 April 2016.
4.In determining whether the additional amount is chargeable, married couples, civil partners and cohabitants (those living as a married couple), along with their dependent children, are treated as one economic unit. They are treated as one economic unit to reduce the risk of properties being moved between individuals for the purposes of avoiding tax.
5.The additional amount of LBTT is chargeable in, for example, a scenario where one spouse owns the existing marital home and then the other spouse purchases an additional residential property. In this scenario the married couple has the same LBTT liability as a married couple who jointly own the home they currently live in and then jointly buy an additional residential property together.
6.The additional amount of LBTT is not chargeable if the buyer is replacing the buyer’s only or main residence. However, before the 2017 Order came into force, the additional amount was chargeable if spouses, civil partners or co-habitants were jointly buying a home to replace a home that was owned by only one of them. They were liable to pay the additional amount due to the fact that only one name was listed on the title deeds.
7.The 2017 Order amended the 2013 Act to provide relief from the additional amount in this scenario for all qualifying future transactions and if buyers entered into the contract to purchase a new main residence on or after 20 May 2017 and the effective date of the transaction was on or after 30 June 2017.
8.This Act aims to give retrospective effect to the 2017 Order, enabling qualifying buyers who have paid the additional amount of LBTT prior to the Order being made to claim a repayment. The Act seeks to provide this relief regardless of the date when joint buyers entered into the contract and regardless of the effective date of the transaction, therefore covering the period and transitional arrangements as provided for by the 2016 Amendment Act and the 2017 Order.
9.The Act consists of four sections, of which section 1 is the principal measure. It gives retrospective effect to amendments made to the 2013 Act by the 2017 Order.
10.An explanation of the Act’s purpose can be found in the Policy Memorandum.
The Additional Amount applies to transactions where at the end of the day that is the effective date of the transaction (usually the date of settlement), the buyer owns more than one dwelling and is not replacing their only or main residence. Replacing in this context means selling a current main residence and buying a new main residence.
