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Monday 17 December 2018

Analysis: Measures that can give you relief on new 6pc stamp duty rate rate

 

Declan McEvoy

Declan McEvoy

There have been significant changes to stamp duty in the last number of years with a large reduction in rates.

The farming sector has benefited from this in that the rate of stamp duty on the purchase of agricultural land had effectively fallen from 9pc to 2pc. With Budget 2018, the rate has now increased to 6pc.

Leasing of Farm Land

One of the recommendations at the Agri Taxation Review, intended to encourage the more productive use of farm land, was that stamp duty relief be given in relation to leases of farmland.

This was subject to a commencement order, and was never signed in as there was difficulty in collecting the data to show how much the relief would actually cost.

The stamp duty relief is a state aid to the agri-sector and therefore the cost of it must be collected. The Finance Bill 2018 now allows for the introduction of this relief as it brings in the necessary changes to allow the documentation to be put in place to collect the tax-saving data.

It will allow, subject to certain conditions, relief for stamp duty on land that is leased on the long-term basis to active farmers. The conditions must be:

  • The term of the lease must be of a period of not less than six years and not more than 35.
  • The land must be used exclusively for farming carried on by the lessee.
  • The land must be farmed on a commercial basis with the view to the realisation of profit thus confining the relief to genuine farmers.

Revenue will accept that the lease may be to an individual, to a partnership or to a company where a named shareholder and the working director farms the land on behalf of the company.

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Where the land is leased to one's own company, the stamp duty relief will still apply. The lessee must either have:

  • an agricultural ­qualification or
  • farm the land for not less than 50pc of this normal working time.

In the event of the conditions not being met, the stamp duty that would have been chargeable upon the grant of the lease falls due together with any interest that would fall due.

Consanguinity Relief

Conveyances and transfers of property between close relatives was subject to stamp duty of one half of the normal rate provided the transferor was under 67.

However, since Budget 2018 this relief has now been changed in that the relief is at the rate of 1pc. This relief is in place up to December 31, 2020.

There are no age restrictions on either the transferor or the transferee in this period. The rate of 1pc applies irrespective of any ages.

The relief is subject to the person receiving the transfer either farming the land or leasing it out to an active farmer.

Young Trained Farmer

It should be noted that the stamp duty exemption for Young Trained Farmers remains in place.

A farmer under 35 years of age who has the required agricultural qualification can benefit from a full exemption of stamp duty on farm transfers provided he meets the necessary conditions, the main one being that he must farm the land.

In summary, for family transfers there is a zero percentage rate of stamp duty where the transferee is a Young Trained Farmer and a rate of 1pc for all other family transfers which include family/sales/purchases.

The only change that has happened is it has now been clarified that to qualify for the stamp duty exemption for Young Trained Farmers, a business plan must be furnished to Teagasc.

This is not a new condition and has been in place, it is simply a 'tidying up' of the legislation to ensure that stamp duty is fully compliant with EU state aid requirements.

Commercial Property

Stamp duty on commercial property including farm lands increased from 2pc to 6pc effective from Budget Day, October 10, 2017.

However, there are now transitional arrangements put in place.

Where purchasers had a binding contract in place before October 11, 2017 and where the transfer is completed before January 1, 2018, then the 2pc rate of stamp duty will apply to those transactions.

Declan McEvoy is head of tax at IFAC Accountants at the Irish Farm Centre


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