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LBTT question on multiple main residences

LBTT question on multiple main residences

A client lives in property A which is in Scotland, as their main residence.  They want to buy B (also in Scotland) and use that as the main residence, and would let out A for the foreseeable future, retaining A until death or possibly selling it down the line.

If they buy B before they sell A, they will have to pay the 3% LBTT surcharge, and as B is likely to cost £1m this will generate an additional £30k of LBTT.  The various examples I've read surrounding LBTT do go onto say that if they sell A within 18 months of it ceasing to be the main residence, they can claim a refund of the 3%.  Even if you decide to rent out A as an alternative to selling it, you are still caught by the 3% charge, despite A not being available to you as a main
residence, so it seems that A would need to be sold within 18 months of leaving it regardless of what use A was put to during that time, in order to get back the 3%.

There are also anti-abuse rules so there's no scope to do any clever inter-spousal transfers to avoid a spouse from having more than one main residence.

So, the question is, can the 3% extra LBTT be prevented by waiting for 18 months in one way or another?  There could be a variety of scenarios (leave A, move in to rented accommodation for 18 months, then buy B and move in there, or perhaps rent out A while living in rented, or live in the rented until A is sold then buy B, and so on!) and the client would be quite happy to consider anything that would save the extra £30k.  They have the cash to purchase the new property.

The Revenue Scotland site doesn't make any reference to the 18 month rule where someone rents out their old main residence if they buy a new one, but the guidance seem contradictory as it also says that someone who owns a BTL and a main residence and sells the main residence to buy another is not caught, so if it is as straight cut as that, it seems that historical use as a main residence is the qualifying factor.  If so, what happens where someone has previously lived in their home and then rents it out because they couldn't sell it, and has gone on to buy another property - perhaps uncommon but it dos happen? 

I fully appreciate that this is not an income or corporation tax question, but like child tax credits, we often get asked about issues that include the word 'tax' when they don't really have any bearing on tax, so wondered if anyone else has been posed a similar question?

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22nd Mar 2016 17:22

Isn't the entire purpose of the LBTT to discourage exactly the sort of property hoarding that your client is attempting? You are essentially trying to find a way around legislation that is specifically designed to stop your client doing what he is trying to do.

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