Documents Deemed Stampable
A range of documents are deemed to be stampable conveyances, notwithstanding that they are not a conveyance on sales. Legislation has applied form many years to certain agreements for the sale of an interest in these categories of property; Otherwise stamp duty could be avoided by use of an agreement for sale, only without a transfer (conveyance).
The deeming provision charge stamp duty in many cases where there could be a transfer of title, usually a beneficial (or equitable) title only, without the creation of a stampable document. Some have been reduced in importnance by more comprehensive anti-avoidance legislation enacted in 2013.
Stamp duty applies to an agreement for lease of more than 35 years as if it is an actual lease once more than 25% of the consideration has been paid. In this case the stamp duty for the lease is not the nominal €12.50 rate. The new rules apply to instruments executed after 13 February 2013. See below.
A contract for the sale of a leasehold interest has been long stampable, where the buyer takes possession of the property and stamp duty is not paid on an instrument within nine months.
Anti-avoidance legislation also covers the surrender of leases. Any lease, long or short, may be surrendered by way of physical surrender of the property by or behalf of the tenant to the landlord. This terminates the lease by itself. It may be effected without the creation of a stampable document. Anti-avoidance legislation deems any document whereby such a surrender is acknowledged or evidenced, to be stampable.
Certain Contracts are / deemed Conveyances
Certain conveyances which are not made on sale, are deemed stampable. A conveyance in contemplation of a sale is stampable. This is the reverse of an agreement in contemplation of a sale.
An agreement for the sale of an equitable estate or interest in real property is inherently stampable. No deed is required so that the contract is in effect an conveyance.
The transfer of a mere nominal interest is generally be subject to nominal duty or exempt. However, if it is made in contemplation of a later sale, it becomes stampable. If the contemplated sale does not happen, it is possible to reclaim, the duty (but within six years only).
Sale Contracts for Certain Assets
Certain types of contract for the sale or gift of an interest in property have been stampable for many years. The legislation applies to an agreement for the sale of an interest in property whatsoever with certain exception. The exceptions were as follows:
- lands and buildings;
- property located outside Ireland;
- goods, wares and merchandise;
- stock, ships, vessels or aircraft
Therefore, the provisions apply to many classes of asset. They do not apply to land and buildings.
Conveyances of property (real and otherwise) outside Ireland is not subject to stamp duty. It would anomalous if stamp duty applied to an agreement for such sale.
Stocks and shares are excluded as the actual transfer of legal title to shares is stampable as a conveyance. The rates differ to those applicable to real property.
The above provision commonly act so as to tax contracts for the sale of business assets. It covers, goodwill deposit accounts, tenant’s fixtures and book debts are covered by the provision.
Stock equipment and movables may pass by delivery. Revenue do not treat current accounts as property for stamp duty purposes, by concession. Intellectual property was formerly covered. However a broad exemption of price for intellectual property since 2004.
In the contract of a sale of a business, it is desirable therefore to minimise stamp duty by segregating various classes of assets in the sale contract.
Resting on Contract and Licences (Land & Buildings)
Legislation was passed in 2007 in order to counteract t the commonly used technique of resting in contract. The 2007 legislation was not commenced and was ultimately re-enacted in 2013 and commenced. However, they coincided with commencement of the financial crisis and were not commenced.
Resting in contract facilitated the avoidance of stamp duty in the case of transfer of real property, i.e. land and building. It operates on the principle that when the purchase monies are paid under a sale contract, the seller became nominee or trustee for the buyer. The beneficial ownership passes by operation of law.
Another variant involved purported grants of rights equivalent to ownership without an actual transfer of ownership. So-called licenses were given to develop land. They might involve a payment of or close to the market value upfront with the granting of certain rights to the licensee equivalent to ownership, including in particular the right to call on the licensor to make transfers of title to nominees.
The the licensee might be permitted to enter the property, develop it and keep the proceeds of exploitation, paying only a nominal fee to the licensor. In this case, the licensor/legal owner has effectively acquired the rights of ownership by contract.
Such arrangements were commonly financed, by the seller giving a limited recourse charge (limited to bare legal interest) to the buyer’s lender. The buyer would also mortgage its beneficial interest.
The legilsation applies to contracts entered after 13th February 2013. It applies to the principal techniques to avoid stamp duty.
- a contract for sale under which the beneficial interest passes
- certain licences, which effectively give the economic benefits of ownership to the licensee.
Resting in Contract
A charge to tax applies where the holder of an interest in property situated in Ireland, enters a contract for the sale of that estate or interest and payments of at least 25 percent of the purchase consideration have been paid to him or to someone on this behalf or at his direction.
The provisions apply to a contract for sale in writing. It must be executed by parties or by at least some of them. If the contract does not proceed but has become stampable on the above basis, a reclaim of a stamp duty may be made.
If there is a deed in conformity with the contract, the provision does not apply. Accordingly in the normal case where a deed is taken, the deed will be stampable and the original contract will not be stampable.
Where a conveyance is later made in accordance with and in conformity with the contract, the stamp duty may be transferred to the conveyance. A conveyance may not be in conformity where there is a sub-sale.
The legislation covers a license to develop or exploit the land, which give the licensee the substantial benefits of ownership. Where the holder of an estate or interest in land enters an agreement with another under which that other his nominee is entitled to enter land and carry out development works, and by virtue of the agreement, the landowner receives a payment of at least 25 percent of the market value of land, the agreement is subject to duty.
There is no equivalent exception to that above, where there is a later deed in conformity with the transaction. It appears that a later conveyance, even one in conformity with the license is stampable. If the license is subsequently rescinded or annulled, then the duty may be reclaimed.
There is a charge of stamp duty in relation to a contract or agreement as if it was a conveyance or transfer of an estate in land where 25% or more of the consideration has been paid and electronic paper or paper return together with stamp duty has not been delivered and paid within 30 days. In this case, the conveyance itself is not stampable, provided the contract has been stamped.
The stamp duty arises when the holder of an estate or interest in land enters an agreement with another person by which that person is allowed to develop the land and more than 25% of the market value of the land is paid to the seller other than in consideration for the sale of the land or an interest in land. The stamp duty arises 30 days after the payment is made.
There are provisions if the contract or agreements are reversed, released or annulled. Upon proof, the stamp duty paid may be repaid.
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