Chapter 2: Eligibility For The Relief – More Detailed Commentary
Buyer Must Be A Natural Person or Persons
14. The Scottish Government’s intention is that the relief will only be available where the buyer(s) is or are a natural person.
Purchase must be of a single dwelling for an amount greater than £145,000
15. The Scottish Government’s progressive approach to taxation means that no tax is due on the purchase of a property for £145,000 or less. As such, the relief will not be a relevant consideration in any such transactions.
16. The intention is that the relief will only be available in relation to the purchase of a single dwelling. In this regard, the intention is to rely on the definition of “dwelling” set out in Part 6 of Schedule 5 of the LBTTSA 2013.
17. This will be combined with the main residence requirement to determine the properties which are eligible for the relief.
Property to be used as a Main Residence
18. In order to be eligible, buyers must intend to use the purchased dwelling as their main residence.
19. Revenue Scotland has published guidance on this issue, which will apply with regard to the relief. LBTT10020 ( https://www.revenue.scot/land-buildings-transaction-tax/guidance/lbtt-legislation-guidance/lbtt10001-lbtt-additional-dwell-16) states that that they will use the same factual test here as is applied to decide where a person lives for the purposes of Scottish Income Tax.
No Prior Ownership of a Dwelling
20. Where an individual has or has previously held a ‘major interest’ in a dwelling, whether individually or jointly with others, they will not be eligible for the relief. Prior ownership of property which is not a dwelling will not be relevant in this regard.
21. In relation to this, a buyer must not have or have held a ‘major interest’ in a dwelling or an equivalent interest in a dwelling situated anywhere else in the world. This is to ensure that property holdings throughout the world are taken into account when considering eligibility for the relief.
22. The draft Order at Annex A sets out a proposed definition of ‘major interest’ as comprising either ownership, or an interest other than ownership with a market value that is or would be above the nil band rate for LBTT. Views on this definition are welcome in response to Question 7 in this consultation to support the Scottish Government’s final proposals.
23. With regard to this issue, account will be taken of the fact that property can be inherited, gifted or held in trust.
24. The Scottish Government’s intention is that the relief will not be available where an individual has previously acquired a ‘major’ interest in a property as a consequence of either an inheritance or a gift.
25. In addition an individual will not be a first time buyer, and therefore ineligible to claim the relief where they are, or have been, either the beneficiary in relation to a dwelling which is held under a bare trust, or a settlement trust under the terms of which they have a relevant interest in any dwelling that is or forms part of the trust property.
26. Consistent with the above, assuming all other relevant tests are met, the relief will however be available in relation to the purchase of a dwelling by a bare trust or settlement trust (in which there is a beneficiary with a relevant interest) if the beneficiary does not hold, or has never previously held, a relevant interest in a dwelling.
27. This approach is consistent with the arrangements in place for LBTT in terms of determining whether or not a person is to be treated as the owner of a dwelling.
Question 1: Do you agree with the Scottish Government’s proposed four key criteria for the relief, as described above?
Question 2: Do you agree that, where there is more than one buyer, all buyers must meet the relevant criteria in order for the relief to be claimed?
Question 3: Do you agree with the Scottish Government’s proposed approach with regard to gifts, inheritance and trusts?
Question 4: Are there any other issues which need to be considered with regard to assessing prior ownership of a dwelling?
28. For reasons of simplicity and the relative infrequency with which such transactions occur for first time buyers, the Scottish Government proposes that the relief will not be available where there is a linked transaction.
Alternative Finance Schemes
29. It is intended that individuals participating in alternative finance schemes will also benefit from the relief, assuming that all relevant criteria are met.
Relief must be claimed in the first return or amendment
30. This position will also be consistent with Section 27(2) of the LBTT(S)A 2013, which states that any relief must be claimed in the first return or in an amendment of that return. Any amendment must be made within twelve months of the filing date of the return.
Question 5: Do you agree with the Scottish Government’s position on linked transactions? If not, in what scenarios should relief be available where there is a linked transaction .
Question 6: Are there other issues, not covered in this consultation, that should be addressed in the legislation or guidance?