HM Insights

Coronavirus – extension to refund period planned for Additional Dwelling Supplement tax

Updated 22 May 2020

In a statement made to the Scottish Parliament by Michael Russell MSP, on 28 April 2020, plans were announced to extend the time during which a main residence must be sold in order to claim a repayment of the ADS tax from Revenue Scotland.

The Chartered Institute of Taxation has expressed concerns that the 18-month period may not now be long enough and that many individuals will lose thousands of pounds as they will be unable to reclaim the ADS tax because their previous main residences have not been able to be sold within that timescale due to current restrictions.

Specific dates have not yet been announced this will hopefully provide some comfort to those individuals who have recently paid the tax and are now unable to complete the sale of their previous property given the uncertainty of the property market post-COVID-19.


Update - extension to 36 months 

Following a request from the Scottish Law Agents Society to Revenue Scotland to extend the period that you can reclaim ADS tax from 18 months to 24 months due to the global COVID-19 virus, the Scottish Government have confirmed that the period has actually been extended to 36 months. This extension of 18 months will allow sellers 36 months in total from the date they purchased their additional property to reclaim a refund of the ADS tax paid. The 36-month period runs from the date of settlement (ie the date on which the purchase price is paid and the keys are handed over) of the transaction that resulted in the seller owning the property that they purchased and the property that they previously resided in as their main residence that they wish to sell.

What tax do I pay on property purchases?

In Scotland, Land & Buildings Transaction Tax (LBTT) is payable on properties with a purchase price of over £145,000 (or £175,000 if you are a First Time Buyer). In addition, if you own two properties on the date of settlement and you are not replacing your main residence, there is another tax called Additional Dwelling Supplement (ADS) also payable. ADS is currently charged at 4% of whole purchase price and was originally introduced in 2016.

Unlike LBTT, it is possible to obtain a refund of ADS if you replace your main residence with the property you are buying, but you just haven’t been able to and/or needed to sell your previous main residence before purchasing your next one.

Currently 18 months is the window of time in which the original home must be sold to reclaim the ADS tax, however the indication now in light of the current restrictive Coronavirus property market is that a longer period of time should be allowed.

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