Overview
A client sought advice after being told that their purchase of a first home in Scotland would be subject to the Additional Dwelling Supplement. This advice arose because the client was named as a trustee on their parents’ property. The client wanted clarity on whether their trustee status affected their entitlement to first time buyer relief under LBTT.
The Challenge
The client faced uncertainty around their LBTT position:
- The client was named as a trustee on their parents’ Scottish property
- The parents held a liferent interest in the property
- The client was advised that being named on another property meant ADS would apply
- This would have resulted in LBTT of £20,000 instead of £0 with first time buyer relief
Our Approach
We reviewed the title sheet and trust documentation to establish the nature of the interests held in the property. The parents were confirmed to be the liferenters, with the right to occupy and enjoy the property for life. The client was not the fiar and was not a beneficiary of the trust.
We analysed the distinction under Scots law between holding title as trustee and having a beneficial interest in the property. Applying Revenue Scotland guidance, we assessed whether the client’s trustee role amounted to ownership for LBTT and ADS purposes. Our review confirmed that the client held no beneficial interest and no economic ownership of the property.
The Outcome
The client was able to proceed with their purchase as a first time buyer with certainty that ADS did not apply. The correct application of Scots property law and LBTT principles ensured the transaction was completed without unnecessary tax exposure and without the need for restructuring or delay.
Key Results
- The client was not treated as owning another dwelling for LBTT purposes
- The Additional Dwelling Supplement did not apply
- The client qualified for first time buyer relief
- LBTT liability reduced from £20,000 to £0
- A total tax saving of £20,000 was achieved
Conclusion
By confirming that the parents held the liferent interest and that the client had no beneficial ownership of the property, we established that the client’s trustee role did not trigger ADS. This allowed the client to retain first time buyer relief and proceed with their purchase with certainty, achieving a significant LBTT saving.
