Additional dwelling supplement

[Lougelly]

My daughter owns (no mortgage) a flat in Edinburgh, she bought a house (with 85% mortgage) jointly with her partner in Oct 2016, her dad and I have redecorated the flat and she was waiting for some renovation work to be done to the whole block before selling it. The flat is now sold and due to complete on 20th March.
She asked the solicitor who they used to buy their house to deal with the sale of the flat.....and that is where the fun started.
Apparently the mortgage they have is a "first time buyer" mortgage to which they are not entitled. They are understandably quite upset about this and are both adamant that neither the mortgage advisor nor the solicitor mentioned "first time buyers" at any point. I've been through all the paperwork for the mortgage agreement and there is certainly nothing even in the small print that says "first time buyers" The solicitor is supposed to be negotiating with the mortgage company to sort this out but says it is likely they will have to pay more.
Secondly the solicitor asked for £5100 "urgently" as Additional dwelling tax should have been paid on the house they bought, and says there might be a "100% penalty" ie an additional £5100 to pay because they did not declare this property on the purchase of their new house.
They have also been told that this tax is not reclaimable on the sale of the flat because her partner did not have a financial interest in the flat so is not replacing his primary residence.
My daughter clearly remembers explaining to the mortgage chap the reason she did not have a "Help to buy" ISA was because she owned the flat they were living in, but other than that no further mention was made of the flat ownership.
Having looked at Revenue Scotland's website I can see that they should have paid the Add.Dwelling Tax, but I find it hard to believe it would not be reclaimable for the reasons stated by their solicitor. It seems very unfair.
Can anyone shed any light on this?
We would be very grateful for any help.
Lou.

[DrBunsenHoneydew]

I fear the solicitor may be correct because of the rule about co-owners being treated as a single entity for tax purposes. As he is not replacing a main residence by the sale of your former residence, no tax is repayable to the "single-entity joint owner".

[Lougelly]

I fear the solicitor may be correct because of the rule about co-owners being treated as a single entity for tax purposes. As he is not replacing a main residence by the sale of your former residence, no tax is repayable to the "single-entity joint owner".

That seems grossly unfair! It's not what I wanted to hear obviously
The really annoying thing is that if the solicitor had not "presumed" they were first time buyers then they could perhaps have been better advised and avoided this trap fairly easily by delaying the purchase of their joint home till they were ready to sell the flat.
Thanks for the reply though.
Lou.

[PinkDalek]

... Secondly the solicitor asked for £5100 "urgently" as Additional dwelling tax should have been paid on the house they bought, and says there might be a "100% penalty" ie an additional £5100 to pay because they did not declare this property on the purchase of their new house. ...

It is unlikely to assist but the first thing I'd do is get a copy of Land and Buildings Transaction Tax return, if not already held.

As for the potential penalties and interest, I've only found this so far which gives the gist of the penalty regime but is entitled:

Penalties for failing to make LBTT return on time rather than incorrect returns
https://www.revenue.scot/legislation/rs ... 5/rstp3006

This may be of interest but, again, may not assist:

Meaning of reasonable care for penalties
https://www.revenue.scot/legislation/rs ... s/rstp3025

Unless the solicitors concerned can use this part (which I've included more in hope than anything else):

Examples of when a penalty might not be due (because you did take reasonable care) include: ...

you acting on advice from a competent adviser which proves to be wrong despite the fact that the adviser was given a full set of the accurate facts; ...

[Lougelly]

Thank you Pink Dalek, useful info to have. They certainly did not willfully withhold the fact that D. owned another property. They were just unaware that it had any relevance to the purchase of their new home and totally unaware that the solicitor had presumed they were first time buyers, they are adamant this was never mentioned as they would immediately have pointed out that D. was not.
It remains to be seen whether a penalty is applied, I'm hoping the solicitor has fessed up to the revenue.

[melonfool]

Thank you Pink Dalek, useful info to have. They certainly did not willfully withhold the fact that D. owned another property. They were just unaware that it had any relevance to the purchase of their new home and totally unaware that the solicitor had presumed they were first time buyers, they are adamant this was never mentioned as they would immediately have pointed out that D. was not.
It remains to be seen whether a penalty is applied, I'm hoping the solicitor has fessed up to the revenue.

I'd find a new solicitor - they'll likely have to pay the tax (unless they can use the get-out PD has posted, though it seems unlikely as it sounds as if the solicitor did NOT have all the facts) but I would be looking to make a complaint against the solicitor.

I'm buying a house and both the solicitor and the mortgage broker have asked if I own another property. They know I own one currently (so am not FTB) but they have also asked if I own any that I am retaining.

I can't imagine the mortgage co would be very difficult about the issue to be honest - most just want the business, so it may be a small fee (I'd imagine an admin fee of c£200) to move to a different product and maybe a % increase but I'd expect no more than 1% and probably less - the differences between FTB mortgages and not are very small these days with rates so low.

But crucially I would move to a different solicitor.

Mel