Land and Buildings Transaction Tax Additional Dwelling Supplement

Propertymark's response to the call for evidence proposes changes to current additional dwelling supplement (ADS) relief for purchases of six or more dwellings.

The consultation focuses on how the legislation underpinning ADS works in certain circumstances, for example in joint-buyer scenarios, and considers whether the timeframes for claiming repayment of ADS are appropriate. We feel the consultation could have included a review of the impact of ADS on investment in the private rented sector.

Presently, ADS is set at four per cent of the transaction value, and full relief from ADS is applicable where six or more properties are purchased in a single transaction. Whilst this may encourage professional and corporate investment, it does not enable the entry of individual private landlords into the sector, and since 94 per cent of registered landlords in Scotland hold a single property, the importance of sustaining individual investment is clear.

Invest in property

Propertymark suggests ADS relief could be applied on a tapering basis to promote investment and help rectify the imbalance between the supply of and demand for private rented property. Under such a system, the full rate might be levied on the purchase of one additional property, but two properties in a single transaction would be subject to an ADS liability of three per cent; three properties subject to ADS at two per cent; four or five properties subject to ADS at one per cent; and six or more liable for full relief from ADS. 

ADS acts as an inhibitor to investment and skews investment to the lower end of the market, meaning the provision of family homes within the PRS is particularly limited. Our response goes on to suggest that the Scottish Government might further review the ADS to see what might be done to stimulate investment across a wider range of property types to help ensure that there is adequate provision of private rented accommodation for a broader set of households. This could involve an acknowledgement of transaction value as well as the number of properties purchased in the transaction.