An over-view on the current stamp duty treatment of the transfer of land and building sites.
New stamping rules, agricultural land, consanguinity relief, farm consolidation relief and residential development stamp duty refund scheme
Margaret O’Connell gives an update on stamp duty measures on the transfer of land and building sites.
On the 11th October 2017, the stamp duty rate on transfers of land increased from 2% to 6%.
There were some transitional reliefs put in place for purchasers of land who had a binding contract in place prior to that date and the transfer took place prior to the 1st January 2018; the old rate was still allowed, although that purchaser would have had to pay the full 6% rate and then seek a refund of 4% later from the Revenue Commissioners.
Prior to this increase in stamp duty, a special relief called ‘Consanguinity Relief’ was allowed between certain relatives transferring land to each other and that reduced the 2% rate further to 1%.
However ‘Consanguinity Relief’ was changed drastically in the Finance Act, putting in place measures to ensure that the relief would from then on only apply to certain transfers in relation to agricultural land only and where certain conditions were met.
Unless therefore consanguinity relief applies, most current transfers of land are stampable at 6% of the market value ( for gifts) or purchase price ( for sales).
How do you qualify for consanguinity relief?
Consanguinity relief which will allow the transfer of land at a stamp duty rate of 1% rather than 6 % is now available only where:
Land is being transferred between related persons*.
For transfers before 25 December 2017, the transferor must be under 67 years but this age restriction was removed for transfers after 25 December 2017.
The transferee must either farm the land for 6 years or lease it to someone who will farm it for 6 years.
The person farming the land either must have a specified qualification ( or obtain that qualification within four years and apply for a rebate) or spend at least 50% of their time farming the land and
The person farming the land must farm it on a commercial basis with a view to making a profit from it.
*Related persons include lineal descendants, civil partners, the civil partner of a parent and adopted children.]
How do you qualify for Farm Consolidation Relief?
One further relief available for stamp duty on the transfer of agricultural land is ‘Farm Consolidation Relief’
The relief rate is 1% of the chargeable amount and applies to transfers, gifts and exchanges.
If you qualify as a farmer ( ie someone who spends not less than 50% of their normal working time farming) and you wish to sell land and buy other land to consolidate your holding or exchange lands with another person, or exchange land by way of a gift, then you may qualify for this relief.
Farm consolidation relief will reduce the rate of stamp duty to 1% and is therefore a very valuable relief to claim where possible.
Furthermore the amount to be stamped is the difference in value between the land sold and purchased or the lots exchanged.
There are certain conditions to be met, including the following:
The transfers/ exchanges must take place after 1 January 2018 and before 31 December 2020.
The purchase/sale or gift must be done within 24 months.
You must obtain a ‘consolidation certificate’ issued by Teagasc*.
The land must be retained for at least five years and be used for farming.
'Land' for the context of this relief means land in Ireland, being agricultural land, land suitable for occupation as woodlands on a commercial basis and farm buildings ‘ of a character appropriate to the land.’
It does not include farm houses or the land occupied with such houses unless the houses are derelict and unfit for human habitation but in any case, residential property still enjoys a stamp duty rate of 1% on transfers of properties on a value up to €1,000,000 ( and 2% over that value).
Note that farm consolidation relief also contains a potential relief for CGT not discussed in this article.
* You should contact your Teagasc office for advice on obtaining a Consolidation Certificate
How do you qualify for the Residential Development Stamp Duty Refund Scheme?
In relation to the transfer of a building site either by way of gift or by purchase, again the rate has increased from 2% to 6% since 2017. However, there is a relief available for purchasers or transferees who intend to use the land to build a residence or residences for transfers on or after 11 October 2017.
The purchaser or transferee must pay the entire 6% stamp duty up front, but if they then fulfil certain conditions, they can apply for a refund of two thirds of the stamp duty paid.
For a one off house, the maximum area of land on which you can apply for a refund is 1 acre or 0.4047 Hectares.
The purchaser or transferee must commence building on the land within 30 months after the date of the transfer.
The claim for the refund can be made electronically after the commencement of building work.
There are certain other conditions and potential clawbacks and there is also a relief available to the purchaser of land who intends to use it to develop a residential estate.
This article is an overview and therefore not meant to be exhaustive. Our solicitors will be happy to guide you through the process and all the conditions involved.
Note that clawback provisions apply to stamp duty reliefs where conditions are not met after obtaining relief.
About the author: Margaret O’Connell is an Associate Solicitor, a Chartered Tax Advisor, a qualified Trust and Estate Practitioner ( TEP) and is a member of STEP international