Group Transfers Relief

Associated Companies

There is relief from stamp duty on transfers of assets between associated companies. It applies to companies but more broadly to bodies corporate. This includes any form of company formed in Ireland as well as building societies, industrial and Provident societies. The relief is available to foreign bodies corporate formed under laws as to incorporation equivalent to the Irish Companies Act.

Companies are associated where

• one body corporate is the beneficial owner of not less than 90% of the ordinary share capital of the other or
• a third body corporate is beneficial owner of not less than 90% of the ordinary share capital of both.

Association Required

The relationship may exist directly or indirectly through a number of subsidiaries. Ordinary share capital refers to all the issued share capital howsoever described of the body corporate other than capital, the holders of which have the right to a dividend and a fixed rate but no other right to share in the profits of the body corporate.

A body corporate is not deemed associated unless one body corporate is beneficially entitled to at least 90% of the profits available for distribution to the shareholders or a third  body corporate is beneficially entitled to 90% of profits available for distribution to the shareholders of each of them.

Furthermore, one body corporate must be beneficially entitled to not less than 90% of the assets of the other body corporate available for distribution to shareholders on a winding up, or similarly, a third body corporate must be beneficially entitled to at least 90% of the assets available on distribution of winding up of each of them.

Relief

The principal relief is in Section 79 of the Stamp Duties  Consolidation Act. This relieves stamp duty on instruments shown to the satisfaction of Revenue Commissioners to have the effect of transferring the beneficial interest of property from one body corporate to an associated body corporate. The transferor must hold the beneficial interest immediately before the transfer.

The relief may be available to transfers of assets in a merger. Where a merger is undertaken in accordance with Chapter 3 of Part 9 of the Companies Act 2014—

• The resolution in the case of a merger effected by way of the summary approval procedure
• order made in the case of a merger effected otherwise than by way of the summary approval procedure

are deemed a transfer.

Anti-Avoidance I

The relief is subject to obvious possible abuse. For example, a property could be sold avoiding stamp duty by way of a “dummy bridge”. An associated company could be established, and the property could be transferred to it. That company could then be sold. The stamp duty rate would be lower on the  shares, and it could be readily contrived that there was debt in the company, reducing its value significantly.

For this reason there are anti-avoidance legislation which counteracts these type of arrangements. The legislation has been amended a couple of times over the years.

It must be shown to the satisfaction of Revenue Commissioners that the instrument was not executed in pursuance of an connection with an arrangement under which

• the consideration or part of it was to be provided or received directly or indirectly other than by an associated company
• the beneficial interest in the property was previously conveyed or transferred by such an entity or
• the transfer or transferee were to cease to be associated.

Anti-Avoidance II

The relief is not available in relation to an instrument if it cannot be shown that the instrument was not executed in pursuance of or in connection with an arrangement under which the consideration, or part of it, was provided or received directly or indirectly by a person other than the body corporate associated with the transferor. This applies if the transferee or transferor, or an associated corporate body, provided or received any of the consideration as a result of carrying out the transaction involving a payment or other disposition by a person other than the body corporate associated with the transferee.

Relief is not available if it cannot be shown to the satisfaction of Revenue that the instrument was not executed in pursuance of or in connection with an arrangement under which the beneficial interest was previously conveyed or transferred directly or indirectly by a person other than an associated body corporate.

Relief is not available if it cannot be shown that the instrument was not executed in pursuance of or in connection with an arrangement under which the transferor or transferee were to cease to be associated. The arrangement operates to deny relief.

An arrangement is any scheme between two or more persons involving a number of steps designed to achieve a desired result. An arrangement would be something in the  contemplation of the parties from the outset. It need not be legally binding and may be a non-binding understanding.

Withdrawal

The relief is withdrawn if any declaration or other evidence furnished is subsequently found to be untrue in any material respect.

Relief is withdrawn if the transferor or transferee ceases to be associated within two years. Upon withdrawal, stamp duty becomes payable with interest from the date on which the transfer or transferee ceased to be associated.

Formerly, a declaration was made by a responsible officer of the company, usually a solicitor, or other evidence as the Revenue may require. This does not apply after 2013. The return is made through ROS.