Some Assistance for House Sellers/Buyers on the Horizon?
This week (week commencing 18th May) it is hoped that emergency legislation may be passed by the Scottish Government to assist house sellers who have been affected by Covid-19. The Corona Virus (No. 2) (Scotland) Bill includes provision whereby an individual who has purchased a new main residence between 24th September 2019 and 24th March 2020 and has paid ADS (Additional Dwelling Supplement) will now have 27 months within which to sell their previous main residence. The draft legislation also gives the Scottish Government power to extend the 27 month period further or to change the purchasers to which is applies, if that is considered necessary for Covid-19 related reasons.
LBTT (Land and Buildings Transaction Tax) is a tax applied to both residential and commercial property transactions where a chargeable interest is acquired. ADS is an LBTT supplement on purchases of additional residential property of £40,000 or more. ADS is charged at 4% of the purchase price and must be paid as part of any LBTT due on a transaction.
The current draft Bill before the Scottish Government recognises that some people may have purchased a new home prior to selling their existing main residence. If ADS had been paid a tax payer can make a claim for repayment if they dispose of the ownership of a previous main residence in the following 18 month period.
Given the effects of the Corona Virus outbreak on the housing market then situations may well develop where a property cannot be sold within the 18 month reclaim period.
The Bill makes provision to assist tax payers whose ability to reclaim ADS has been most directly affected by the Corona Virus outbreak and will increase the 18 month period by 9 months which will mean that those tax payers will in effect have 27 months within which to dispose of their previous main residence and will then still be eligible for a repayment of the ADS.
If passed this week, this will be a positive sign for the housing market. There are currently further approaches being made to the Government in an attempt to try and stimulate the housing market once the lockdown provisions are eased. Some of these also relate to payment of LBTT and a payment “holiday” or reduction in the levels payable which will hopefully also be considered in the fullness of time.
If you would like to discuss any aspect of your transaction please feel free to contact one of our property lawyers.