Limits on ADS Repayment: FTT Clarifies Disposal in Replacement of Main Residence

This case, brought before the First-tier Tribunal (FTT), brings clarity to the meaning of “disposal” in the context of reclaiming the Additional Dwelling Supplement (ADS) under Scotland’s Land and Buildings Transaction Tax (LBTT) regime.      

LBTT, established under the Land and Buildings Transaction Tax (Scotland) Act 2013 (LBTTA), is a devolved tax that applies specifically to land transactions in Scotland. Within this regime, ADS is a surcharge applied over the standard LBTT rates when, at the effective date of a transaction, the buyer owns more than one residential property. However, paying ADS is not necessarily final. As long as the conditions set out under LBTTA are met, buyers who dispose of their previous main residence may be eligible to reclaim the ADS paid on the purchase of their new main residence.

Here, the appeal was made by Mr. Clark (the “Appellant”) who acquired an adjacent dwelling to his main residence and then reintegrated both properties into a single dwelling. The Appellant requested a repayment of the ADS he had paid as, after the reintegration, he had "disposed of previous main residence since it no longer exists as such”. This interpretation was not accepted by Revenue Scotland. Hence, the central issue in this case concerned the interpretation of what constitutes a “disposal of ownership” under paragraph 8(1)(a) of Schedule 2A of the LBTTA.

The FTT refused the Appellant’s argument holding that the conditions for repayment of ADS under Paragraph 8(1)(a) of Schedule 2A LBTTA had not been met. Although “disposal” has not been defined in the Act, the word “disposal of ownership” being clear and unambiguous, should be given its ordinary meaning. Relying on the ordinary meaning of the term “dispose”, which encompasses actions such as to “distribute, formally assign or hand over, transfer into the hands of another by sale or bequest”, the FTT found it evident that the reintegration of adjacent properties into a single dwelling does not, in any sense, constitute a “disposal of ownership”.

In conclusion, it is not always necessary for legislation to define every term explicitly. Where a word carries a clear and commonly understood meaning, its ordinary interpretation is generally applied. In the case of the term “disposal”, FTT found no ambiguity in its meaning. The Tribunal held that if it had been the intention of the Scottish Parliament to provide relief for unique set of circumstances, it would have done so by express words.

While decisions from the FTT are not conclusive, they may carry persuasive authority, particularly in cases involving similar factual circumstances.

Read the full decision of Andrew John Edward Clark vs Revenue Scotland [2018] FTSTC 4 here.