Farms and the Additional Dwellings Supplement

Land and Buildings Transaction Tax (LBTT) replaced Stamp Duty Land Tax (SDLT) in Scotland from April 2015 and careful consideration needs to be given when purchasing a farm which includes residential properties due to the recent introduction of the Additional Dwellings Supplement (ADS) on second properties.

When calculating LBTT on the purchase of a farm which includes residential property, the total consideration will be assessed under the lower commercial rates (please click here for more details) due to the mixed use of the property. However, the consideration also needs to be apportioned on a ‘just and reasonable’ basis between the residential property and the commercial property to assess whether the ADS of 3% applies.

There are various reliefs that can be claimed to help reduce the exposure to LBTT including multiple dwellings relief (2 or more properties) or if the purchase includes 6 or more properties then ADS will not be applicable.

LBTT is now very complex due to the interaction of the various rates, reliefs and ADS and the distinction between residential and commercial property is now more important than ever.

If you are considering acquiring additional land then LBTT should be considered early as it can have a significant impact on the overall cost of acquisition and any finance that may be required.