Additional Dwelling Supplement in Scotland - seeking advice

revdocpaulo

Hi folks - newbie here needing some help. Our situation's a bit out of the norm so we're struggling to get reliable advice.

Up until recently I was a Church of Scotland minister, living in a tied house - a manse - that came with the job. We've been here for 20 years, but I've recently changed jobs and as a result we'll need to find our own place to live and move out. Like most clergy, we kept a hand in the market by buying a wee buy-to-let in Aberdeen - just one bedroom and too small for our family (there are 5 of us). (With the bottom falling out of the property market locally, we're anticipating getting between 50 and 60% of what we paid for it back in 2007, but that's another story).

We accept that when we buy our new property we're liable to pay ADS (8% of the value of new property), but unlike most people we won't be able to reclaim it because we've never lived in our original property as our main residence (and the manse doesn't count as main residence for tax purposes). But how could we live in that flat when we were obliged to live in a manse as part of my job, and the house was too small for us all anyway? 

We've been round the houses trying to find solutions, but if anyone has any suggestions we'd love to hear them. The situation's compounded by having to move out of the manse in a couple of months - they've been really kind in letting us stay on for a while, but that can't continue indefinitely.

We can't sell the flat just now (which would solve the problem) as we have a problem tenant who's refusing to leave. We're pursuing eviction proceedings, but there's no chance of selling the flat before we have to vacate the manse.

We can't live in the flat to establish credentials as a main residence as it's too small for us all, and currently occupied. 

We thought about me becoming the sole owner of the flat, and my wife taking out the mortgage on the new property, hoping that loophole would allow us to avoid ADS, but we're told that as a married couple we will be considered as one economic unit. 

We thought about transferring ownership to one of our older kids, but can't do that while the eviction is ongoing and wouldn't want to open up a financial/txation can of worms for them later down the line. 

So basically it's looking like a tax system that's meant to stop the rich from buying too many additional properties is going to severly penalise folk like us who currently only own one wee flat that's going to fetch £70k in the market if we're lucky.

Tired scratching our heads over this one but delighted if anyone can help us figure a way out.

Cheers



 

Bookworm225

there is no exception made for owning a property whilst having to live in employer provided accommodation. (ADS does not operate the same way as CGT where such an exception does exist)

You may claim to be the typical "poor" clergyman, but fact remains you have a foot firmly on the property ladder. You did not "need" to buy a BTL property and thus become a "filthy" landlord, so why should it be ignored for tax purposes?

at the end of the day you will go from owning 1 to owning 2 properties, exactly what ADS is designed to penalise if you meet the 4 conditions that trigger it.

Cairnpapple

Is there a reason that you need to buy straight away? Could you rent until you have managed to evict the tenant and sell the flat?

sheramber

Is the flat jointly owned?

Is the value definitely £70k?

see last bullet point. 

For transactions with an effective date on or after 1 April 2024, the ADS will not apply if: 

• you only own one dwelling at the end of the effective date

or

• the consideration payable for the property is less than £40,000

or

• you own an additional property, but that property has a value less than £40,000

or

• you own a share in a jointly owned property and the value of your share is less than £40,000, or

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

SDLT_Geek

sheramber said:

Is the flat jointly owned?

Is the value definitely £70k?

see last bullet point. 

For transactions with an effective date on or after 1 April 2024, the ADS will not apply if: 

• you only own one dwelling at the end of the effective date

or

• the consideration payable for the property is less than £40,000

or

• you own an additional property, but that property has a value less than £40,000

or

• you own a share in a jointly owned property and the value of your share is less than £40,000, or

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

I was thinking the same thing.  For the equivalent rules in England, when looking at the "other property owned" and the "under £40,000" test, it is under £40,000 per owner, even for a married couple.

I know that for Wales that door is closed, as the equivalent Land Transaction Tax rules aggregate the interests of a married couple for this purpose.

I am not sure if the rules in Scotland work like the English rules or like the Welsh ones, but this would be worth checking as a possible angle.