John Cullinane, CIOT tax policy director

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

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 Scotland, along with a recent parliamentary question, 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 institute 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 delayed.

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.”

He added: “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.”

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