Families forced to pay a ‘second homes tax’ when they move house

THOUSANDS of Scots families have been forced to pay a swingeing ‘second homes tax’ even though they have no intention of keeping two properties.

Ordinary people seeking to take a step up the property ladder have had to pay thousands of pounds extra simply because they opt to buy before they have completed the sale of their existing home.

The ‘additional dwelling supplement’ (ADS), introduced by the Scottish Government in April last year, adds a tax of 3 per cent of the value of a home if the buyer owns another property.

It is designed to rake in more money from buy-to-let landlords and holiday home owners.

But figures show up to one in four of all buyers paying the tax are ‘accidental second-home owners’ who have been unable to sell a property before finalising a deal on a replacement.

It is estimated that of the 25,190 who have paid the ADS, up to 6,297 do not intend to keep the second property.

When it introduced the law, the Scottish Government rejected calls from bodies including the Law Society of Scotland to include a ‘grace period’ allowing buyers to complete the sale of their existing home before being eligible for the tax.

Any ‘accidental second homeowner’ can apply for a refund of the tax if they sell their property within 18 months, but they still have to find the extra money before they can buy a new home.

For those buying a £200,000 property, a second homes tax of £6,000 would have to be paid as well as £1,100 in land and buildings transaction tax (LBTT).

For a £400,000 purchase, the buyer would have to pay a £12,000 second homes tax in addition to £13,350 in LBTT.

Scottish Conservative housing spokesman Graham Simpson said: ‘This is another example of an SNP finance policy which has significant unintended consequences.

‘Thousands of people being hit by this tax have no intention of being second-home owners. Yet still they are having to cough up significant sums at a time when they can probably least afford it.

‘The Scottish Government has to look at the negative impact here and have a rethink about how this policy is implemented.’

The total amount raised by the tax since it was introduced has been £125.1million.

But Revenue Scotland said it has agreed to repay £17.1million of that sum because buyers have sold their other property and claimed a refund.

However, as it can take several months before a refund is claimed, the ratio of buyers demanding refunds is likely to rise.

Of the tax paid in the early months of the new ADS being introduced, up to 25 per cent has subsequently been refunded.

Based on the 25,190 who have paid the tax, that means up to 6297 could demand money back.

In England, a ‘grace period’ of up to 36 months is allowed for some purchases before the ADS is payable, in order to allow another property, which is the main family home, to be sold.

Property experts have raised fears that the additional tax bill could prevent some families from moving up the property ladder until they sell their existing home. But that could leave some having to temporarily rent a property.

A Scottish Government spokesman said: ‘There are currently no plans to introduce a grace period.

‘Buyers can reclaim any ADS paid where they have disposed of their previous main residence within 18 months and we will continue to monitor the position as part of the on-going process of devolved tax management.’