Call for clarity on second home tax charge refunds

Some house buyers could miss out on being able to claim a refund for a property tax charge if they have been unable to sell their old home because of the COVID-19 pandemic, the Chartered Institute of Taxation (CIOT) has said.

The second home charge, or Additional Dwelling Supplement (ADS), is a 4 per cent surcharge on house purchases – paid in addition to regular rates of Land and Buildings Transaction Tax (LBTT) – charged when a buyer already owns a home1.

If taxpayers buy a new home before selling their old one, they can claim a repayment of ADS provided that they sell their home within 18 months of buying their new one. These taxpayers would not be regarded as buying a ‘second home’.

The CIOT said guidance published by Revenue Scotland2, along with a recent parliamentary question3, suggested there could be concerns that some homeowners could miss out on a refund because they may be unable to sell their old home in the 18-month period because of Coronavirus.

The CIOT said those most likely to be affected would be movers who had completed the purchase of a new home but who had yet to sell their existing home before the Scottish Government announced at the end of March that property moves should be delayed4.

Any changes to this rule would require the Scottish Government to amend LBTT legislation.

The CIOT said it would be helpful for the Scottish Government to set out whether it intends to amend its ADS refund policy in light of the COVID-19 outbreak and how they intend to legislate for this to provide reassurance to affected house purchasers.

John Cullinane, CIOT tax policy director, said:

“This guidance suggests that some people moving house could miss out on a refund of the Additional Dwelling Supplement because the COVID-19 outbreak has brought the property market to a temporary standstill. This could prevent them from selling their original home in the timeframe allowed by law.

“Revenue Scotland may be aware of the numbers of taxpayers who have said they intend to claim a refund, but any changes to the rules for ADS would need to be addressed by the Scottish Government in legislation.

“We think it would be helpful for the Scottish Government to set out whether it proposes to address these concerns and the steps it plans to take in response to support house buyers in these circumstances.

“This could include providing clarification on whether – and for how long – the period for claiming an ADS refund will be extended, the evidence required to satisfy the authorities that a claim is being made in good faith and the cut-off points for eligibility, both in terms of the purchase of their new home and the sale of their old one.

“It is an unfortunate and unintended consequence of the COVID-19 pandemic, but one that is within the gift of the Scottish Parliament to resolve.”


Notes for editors


1. The ADS is payable on all property purchases above £40,000 where the buyer already owns a residential property anywhere in the world. It is payable on the full sale price of the property, unless the buyer is replacing their main residence. In these circumstances, they have 18-months from the day after they have bought their new home to sell their old home and claim for a refund of ADS.

Further information on Land and Buildings Transaction Tax is available here –

2. Updated guidance on claims for repayment of Additional Dwelling Supplement from Revenue Scotland – published on its website on 16 April 2020 – states that, “Questions around the current 18 month timeline for Additional Dwelling Supplement (ADS) repayment claims are being raised by a number of Taxpayers and stakeholders. The Scottish Government is responsible for policy decisions related to Land and Building Transaction Tax (LBTT). The Scottish Government is aware of the concerns and is considering the issue”.

3. A written parliamentary question on the issue was tabled by Conservative MSP Alexander Burnett on 27 March 2020 and answered on 17 April 2020. It is replicated below for reference:

Alexander Burnett (Aberdeenshire West) (Con): To ask the Scottish Government whether it will review the timing rules of the Additional Dwelling Supplement application following the temporary suspension of Registers of Scotland activities. S5W-28127

Minister for Europe, Migration & International Development, Ben Macpherson: The Scottish Government is aware of the concerns that have been raised on this matter and is considering the position.

4. Taxpayers are able to indicate to Revenue Scotland whether they intend to claim a refund of ADS when they submit their original LBTT return and payment. This information should provide an idea of the numbers of taxpayers who could be potentially impacted by these delays.

The Scottish Government published guidance on 31 March 2020 recommending that property moves be delayed as a result of Coronavirus. It added that the buying and selling process ‘is likely to take longer than normal’.

5. The Chartered Institute of Taxation

The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.

Contact: Chris Young, External Relations Officer, 07900 241 584