Recent changes to the LBTT additional dwelling supplement

While the additional dwelling supplement – or ADS the Scottish equivalent of the SDLT higher rates for additional dwellings (HRAD) – is frequently touted as a ‘second homes tax’ that is a misnomer. It has never really functioned as a second home tax. It turns out that adequately defining a second home – especially the type of second home which deserves to bear a flat tax of 6% – is plain hard.

Basic concepts

The original ADS regime – brought into force in 2016 in response to the introduction of the HRAD – had wide qualifying conditions and very narrow exemptions.

Three core concepts about the original ADS rules are:

The two or more dwellings test. For an individual taxpayer who is not buying as part of a real estate business the ADS charge (LBTTSA 2013 Sch 2A para 2 (unless otherwise flagged...