Additional Dwelling Supplement - Scotland - complicated situation house fire and demolition

npowerckd

Hopefully someone can shed some light as Revenue Scotland thus far have not been able to answer
the scenario is complicated...
property 1 - purchased 2006 - buy to let mortgage and currently rented
property 2 - purchased 2012 - my residential home

Whilst the above may seem easy, property 2 has been destroyed by fire and has been demolished and the insurance claim has been settled - however until the bank sell the land we have "legal" ownership of the land (land registry), we have no rights to it - we cant keep it, we cant build on it - its going to be sold by the bank and they will changed the ownership once this is done

Property 3 - what we are having to buy as our new residential home

Now when i spoke to inland revenue previously they had said as we retain ownership then we liable for ADS (and claim it back on sale), however that was with a dwelling (albeit inhabitable) on the site, now there is no property and no rights to build and its just effectively waste ground what are the chances we are going to have to pay ADS

Any help would be appreciated.

user1977

Yes, that does sound complicated, and off the top of my head I don't know whether the legislation anticipated that sort of situation.

If you've got a purchase on the go, can't your solicitor provide any advice?

npowerckd

nope nobody seems to be clear as ADS element is done direct through the Inland Revenue, they cant even say if we have to pay it as not able to give advise, just explain the rules.. so they have referred to the compliance team to have a look it. i was curious if anyone who just owned land and bought a second property encountered this perhaps

ProDave

But you own the buy to let, so regardless of the state of the ownership of the burned out house, you would still be buying a second property.

Why did the insurance not pay for the burned out house to be rebuilt for you to move back into?  

npowerckd

Thankfully it doesn't work like that you pay the additional dwelling tax only if that property is not going to be your residence, I'd need to get the exact info to explain it better but that aspect is fine. As for the rebuild insurance decided that it was cheaper to cash out than to rebuild and they have overriding say how they choose to settle claim 

npowerckd

Leaves us in a worse financial position with a new mortgage etc but that's a whole different story 

ProDave

npowerckd said:

Thankfully it doesn't work like that you pay the additional dwelling tax only if that property is not going to be your residence, I'd need to get the exact info to explain it better but that aspect is fine. As for the rebuild insurance decided that it was cheaper to cash out than to rebuild and they have overriding say how they choose to settle claim 

Can you quote the legislation?  I am happy to be corrected but I am sure people have complained at having to pay ADS because they also own a BTL.

Re the insurance, I would not have accepted a situation where you would be worse off.  Never accept the first offer.

sheramber

You don't pay it if you are replacing your main residence

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• https://revenue.scot/taxes/land-buildings-transaction-tax/additional-dwelling-supplement-ads

npowerckd

We didn't accept the first offer which was pathetic what we have accepted is the market value of our house, all solicitor fees for us purchasing a new house and them footing the bill for lbbt as well as various other moving house related expense. I would expect them to pay for the average house price in the area, if we spend over and above that that's our problem but either we happy with the amount agreed and covered in our insruance policy and we have taken advise from ombudsman in respect of the fact we are not being completly indemnified, however my claim wasn't really what I wanted to discuss 

Both property 1 and 2 were purchased before ads came into force in 2016 so we never paid it previously and inland revenue is saying that our issue is property 2 to 3. So that's what I'm trying to establish, it's a mess 

npowerckd

Sherbert I agree however it boils down to ownership as told by revenue Scotland until the bank sell the land we still own a residential property despite their not actually being a house their. It would just be nice to have a definitive answer from revenue Scotland which they seem to be unable to give 

ProDave

Does it work like in England, if you temporariliy own 2 "main residences" and then sell one within a certain period, you get the additional land tax refunded?  If it does, then as soon as the land registry issue is resolved and you no longer own the now empty plot, you will get it back.