Stamp Duty Reliefs: Finance Act 2005
The Conveyancing Committee has been asked by the Revenue Commissioners to bring to your notice certain aspects of the Finance Act, 2005 relating to stamp duty that entail a change in the certificates required to be inserted in instruments. The provisions relate to the new farm consolidation relief and the stamp duty relief for first-time buyers.
Farm consolidation relief (section 121, Finance Act, 2005)
Section 121 inserts a new section 81B into the Stamp Duties Consolidation Act, 1999, which provides for a stamp duty relief for an exchange of farm land between two farmers for the purposes of consolidating each farmer’s holding.
The new relief will mean that no stamp duty will be charged on an exchange of such lands where the lands are of equal value. In a case where the lands exchanged are not of equal value, stamp duty will be charged on the amount of the difference in the value of the lands concerned. Where consideration is paid in respect of the difference (or part of the difference) in those values, it must be payable in cash.
This new relief applies to instruments executed on or after 1 July 2005 and on or before 30 June 2007 and the instrument must contain a certificate to the effect that the provisions of section 81B of the Stamp Duties Consolidation Act, 1999 apply where the relief is claimed.
Further information regarding the relief and the wording of the new certificate (which is also available on the Revenue , is attached at appendix 1.
First-time buyer relief (section 126, Finance Act, 2005)
Section 126 of the Finance Act, 2005 first confirms the changes to section 92B of the Stamp Duties Consolidation Act, 1999 announced in the budget, reducing the stamp duty rates for firsttime buyers who are owner occupiers of second-hand houses. The revised stamp duty rates apply to instruments executed on or after 2 December 2004.
Second, this section also ensures that all new houses with a floor area under 125 square metres will have to have a floor area compliance certificate within the meaning of section 91A of the Stamp Duties Consolidation Act, 1999 to avail of an exemption from stamp duty by providing that first-time buyer relief is no longer available to such houses. To facilitate this change, certificate no 5 in table 4 of leaflet SD10A has been amended to restrict application of first-time buyer relief to second-hand houses. This change applies to instruments executed on or after 1 March 2005.
Further information in relation to the changes to the first-time buyer relief (which is also available on the Revenue , is attached at appendix 2.
A revised version of leaflet SD 10A, which includes the wording of all Revenue certificates required in instruments for stamp duty purposes, is also available on the Revenue website.
APPENDIX 1
FARM CONSOLIDATION RELIEF
Purpose of the farm consolidation relief
Section 81B of the Stamp Duties Consolidation Act, 1999 provides for a new stamp duty relief which applies in respect of an exchange of land between two farmers for the purposes of consolidating each farmer’s holding.
What is farm consolidation relief?
The new relief provides that where there is a valid consolidation certificate in existence at the time of an exchange of lands, no stamp duty will be charged on an exchange of such lands where the lands are of equal value. In a case where the lands exchanged are not of equal value, stamp duty will only be charged on the amount of the difference in the value of the lands concerned. This stamp duty is payable by the person or persons to whom the land which is of greater value is transferred. Where consideration is paid in respect of the difference (or part of the difference) in those values, it must be payable in cash.
The new relief applies to instruments executed on or after 1 July 2005 and on or before 30 June 2007.
What is a consolidation certificate?
A consolidation certificate is a certificate issued by Teagasc for the purposes of the relief to each farmer concerned in an exchange of lands. This certificate identifies the lands involved, the owners of such lands, and certifies that Teagasc is satisfied that the exchange of lands complies with or will comply with the conditions of consolidation.
The conditions of consolidation, together with instructions on how to apply for a consolidation certificate and the supporting documentation required to be submitted when an application is made for a consolidation certificate, will be set down in guidelines to be made by the minister for agriculture and food with the consent of the minister for finance.
Who is eligible for the relief?
The farmers involved in an exchange of lands are eligible for the relief. A farmer is a person who spends not less than 50% of his or her normal working time farming. The relief can also apply to an exchange of lands where not all of the joint owners, on either side of the exchange, are farmers. However, the relief does not apply where any of the parties to the exchange is a company.
What type of land does the relief apply to?
The relief applies to exchanges of agricultural land, including land suitable for occupation as woodlands on a commercial basis in the state and farm buildings on that land. Dwelling houses or the lands occupied with such dwelling houses are not included unless they are derelict and unfit for human habitation.
What conditions must be met before relief will be granted?
- The deed of transfer must contain a certificate to the effect that the provisions of section 81B of the Stamp Duties Consolidation Act, 1999 apply to the transfer. The wording of this certificate is:
‘It is hereby certified that section 81B (farm consolidation relief) of the Stamp Duties Consolidation Act, 1999, applies to this instrument’
- The following documentation/ information must be submitted to the Revenue Commissioners with the deed of transfer when it is presented for adjudication:
- a consolidation certificate that is valid on the date of execution of the deed effecting the exchange – a consolidation certificate is valid for one year from the date it is issued
- a declaration* to the effect that each farmer who is a party to the deed of transfer will, for a period of five years from the date of execution of the deed of transfer, remain a farmer and will farm the land exchanged
- a declaration* to the effect that each person who is a party to the deed of transfer will, for a period of five years from the date of execution of the deed of transfer, retain ownership of his or her interest in the exchanged land and that the land will be used for farming
- the PPS number* of each person who is a party to the deed of transfer.
- Where there is more than one deed of transfer required to effect an exchange of lands, all the deeds must contain the appropriate certificate that section 81B applies to the deed and must be presented for adjudication at the same time. Where the lands exchanged are not of equal value and there is more than one deed of transfer required to effect an exchange of lands, only the principal deed is chargeable to stamp duty and the other deeds of transfer will be adjudicated as not chargeable with any duty.
* A leaflet containing an application form relating to the relief will be published shortly.
Can the relief be clawed back?
The amount of relief actually granted will be clawed back by way of a penalty if the land or part of the land is disposed of within five years from the date of execution of the deed of transfer giving effect to the exchange of lands.
The amount of the penalty is the difference between the duty that would have been charged on the value of all the lands transferred to the farmer in the first instance (that is, under section 37 of the Stamp Duties Consolidation Act, 1999) had the relief not applied and the duty (if any) that was charged under section 81B. Interest is also charged on the penalty at the rate of 0.0273 per cent per day from the date of the disposal to the date the penalty is paid.
Are there any situations where the relief will not be clawed back?
A clawback of the relief will not occur where the land is compulsorily acquired or is the subject of another exchange of lands which qualifies for farm consolidation relief.
In addition, a clawback of the relief will not occur where a farmer or other joint owner disposes of part of the land to a spouse for the purpose of creating a joint tenancy or where one joint owner disposes of part of the land to another joint owner, who is a farmer.
What other penalties can apply?
Any person who furnishes a false declaration will be liable to a penalty of an amount equal to the difference between 125% of the duty that would have been charged on all the lands transferred to that person had the relief not applied and the duty (if any) that was charged under section 81B, together with interest on the penalty at the rate of 0.0273 per cent per day from the date of execution of the deed of transfer to the date the penalty is paid.
A similar penalty, together with appropriate interest (as above), applies where an invalid consolidation certificate is used to obtain the relief.
APPENDIX 2
FIRST-TIME BUYER RELIEF
Section 126 of the Finance Act, 2005 amends section 92B of the Stamp Duties Consolidation Act, 1999, which provides for relief from stamp duty for first-time buyers of residential property. The effect of the changes is set out below, together with some general information in relation to ‘frequently- asked questions’ regarding the application of the relief.
Revised rates
The stamp duty rates payable by first-time buyers who are owneroccupiers of second-hand residential property up to €635,000 have been reduced. The revised stamp duty rates, which apply to instruments executed on or after 2 December 2004, are set out in the panel below.
New houses
The relief under section 92B is no longer applicable to instruments executed on or after 1 March 2005 which give effect to the purchase of new houses with a floor area under 125 square metres. First-time buyers who are owner-occupiers will continue to be exempt from stamp duty on the purchase of such houses under section 91A of the Stamp Duties Consolidation Act, 1999 where a floor area compliance certificate has been issued by the minister for the environment, heritage and local government.
Partial relief under section 92 of the Stamp Duties Consolidation Act, 1999, based on the new rate structure outlined above, will continue to apply to first-time buyers who are owner-occupiers of new houses where the floor area of such houses exceeds 125 square metres.
Certification
There has been no change in the stamp duty threshold bands and the transaction certificate to be included in the instrument should continue to recite the appropriate threshold amount.
There has been a change in the certification required to avail of first-time buyer relief on the purchase of a second-hand house following the exclusion of new houses with a floor area under 125 square metres from the scope of the relief. The certificates required to be inserted in instruments where first-time buyer relief is claimed on the purchase of a second-hand house are set out in table 3 of leaflet SD 10A (certificate numbers 3A/B, 5, 6, 7B and 8A/B) and the wording of those certificates is set out in table 4 of leaflet SD 10A.
The new wording of certificate no 5 in table 4 is as follows:
‘It is hereby certified that this instrument gives effect to the purchase of a dwelling-house/ apartment and that section 92B(3A) (residential property first-time purchaser relief) of the Stamp Duties Consolidation Act, 1999 does not apply to this instrument’.
By certifying that section 92B(3A) does not apply, it is being confirmed that the instrument does not relate to a new house with a floor area under 125 square metres and only relates to a second-hand house. The revised certificate should be included in instruments executed on or after 1 March 2005 where first-time buyer relief is claimed on the purchase of a second-hand house.