The Scottish Government has introduced legislation to the Scottish Parliament that will extend the period for eligible property buyers to claim a refund of the Additional Dwelling Supplement (ADS) of Land and Buildings Transaction Tax (LBTT).
The measures form part of the Scottish Government’s Coronavirus (Scotland) (No.2) Bill.
If a person buys a new house before they sell their old main residence, they are liable to pay the 4 per cent ADS surcharge. They can reclaim this provided they sell their old home within a timeframe set in legislation.
The Bill proposes a temporary change to the arrangements for ADS by:
- Extending the period that eligible taxpayers can claim a refund of ADS from 18 to 27 months (a 9-month extension)
- It will cover transactions that took place between 24 September 2018 and 24 March 2020
- Giving ministers the power to further amend these limits for reasons related to Coronavirus and to be able to do so retrospectively
The first stage of scrutiny took place on Wednesday. Following consideration of the Bill by the parliament’s COVID-19 committee in the morning, MSPs unanimously backed the measures in the parliament chamber that afternoon.
During the morning committee session, Liberal Democrat MSP Beatrice Wishart raised questions regarding the factors the government had taken into consideration when deciding to increase the time limit for claiming ADS from 18 to 27 months. She also noted that the current guidelines in England ordinarily allow for repayment claims to be made over a 36-month timeframe.
Constitution Secretary Michael Russell said that the timeframe had been decided on the basis of ‘what appeared’ from stakeholders to be a ‘reasonable period of time’. He also said that the government could not extend the deadline ‘perpetually’ (although the Bill gives them the power to revisit these proposals).
Earlier, the Law Society of Scotland suggested that ministers may have to revisit the deadlines currently contained in the Bill. Michael Clancy said that the uncertainty around the pandemic and the potential for further lockdown measures later this year could create further market volatility.
This was a point covered by the Chartered Institute of Taxation in its written evidence to the committee.
In the afternoon debate, Alex Cole-Hamilton (Lib Dem) confirmed that his party would bring forward an amendment to extend the refund period from 27 to 36 months, bringing the regime into line with the English regime. He said such a move would help address concerns that taxpayers in rural and island communities could face challenges in trying to sell their homes.
Responding for the Scottish Government later in the debate, the Europe and international development minister Jenny Gilruth said that the decision to extend the refund period from 18 to 27 months was reached following an analysis of the Scottish housing market, which had considered the ‘substantial’ rural housing market.
The ADS proposals have the support of the Scottish Conservative. Miles Briggs described the government’s proposals as ‘commonsense’, while his colleague Graham Simpson said they were ‘eminently sensible’. Mr Simpson also floated a suggestion that a temporary cut or time-limited suspension of LBTT could help to revive Scotland’s housing market.
The Bill is scheduled to complete its passage next week, with the Stage 2 and Stage 3 debates scheduled for 19 and 20 May. Any amendments, such as that being proposed by the Scottish Liberal Democrats, must be submitted no later than Friday 15 May for them to be considered.