Everything you need to know about paying stamp duty on land transfers between related persons
Revenue has clarified the new tax relief measures for land transfers between related persons
Readers may recall the considerable confusion on Stamp Duty rates following last October’s budget.
The prevailing rate at the time of 1pc for transfers or sales between related parties was increased to 6pc — only to be reduced to 1pc again after the farm organisations created a furore.
What was unclear, however, was whether the same terms and conditions that attached to the previous 1pc rate also applied to the new 1pc rate. Revenue has recently clarified the matter.
What is ‘consanguinity relief’?
Consanguinity Relief applies to stamp duty on conveyances of non-residential property, whether by sale or gift, between certain related persons.
The relief represents a saving of 5pc of the value of the property being conveyed. Until December 25 last, the relief was only available where the person transferring was under 67, but that age limit has been removed. Persons availing of the relief are required to observe certain conditions for a period of six years.
For the purposes of Consanguinity Relief, related persons include: child, grandchild, parent, grandparent, step-parent, uncle, aunt, brother, sister, niece, nephew, step-brother, and partner.
Related persons can also
include a person who has resided with, was under the care of, and was maintained at the expense of the transferor throughout a period of five years prior to that person reaching 18
The individual receiving the land must farm it for a period of not less than six years, or alternatively must lease it for a period of not less than six years to an individual who will farm the land.
The person who does actually farm the land must be the holder of (or within four years become the holder of) a required farming qualification such as the Green Cert.
If they do not have the required farming qualification, they must spend not less than 50pc of their normal working time farming the land.
Revenue accepts for the purpose of the relief that ‘normal working time’ — including on-farm and off-farm working time — approximates to 40 hours per week.
This enables farmers with off-farm employment to
qualify for the relief provided they spend a minimum average of 20 hours per week working on the farm.
Most full-time, off-farm jobs extending to 40 hours per week are unlikely to qualify, but occupations such as teaching may qualify.
Where the individual can show that his or her normal working time is somewhat less than 40 hours a week, then the 50pc requirement will be applied to the actual hours worked.
This is subject to the overriding requirement that the land is farmed on a commercial basis.
Revenue will allow the relief where the land is leased to a partnership or to a company whose main shareholder and working director farms the land on behalf of the company.
Revenue will also allow a situation where a company is owned equally by an individual and that individual’s spouse and at least one of them satisfies the working director and the working time and/or farm qualification requirements as mentioned above.
Where the person who farms the land is not in a position to farm on a full-time basis and is not the holder of a required qualification at the date of the transfer, but intends to become the holder of such a qualification within a period of four years from that date, the relief may be claimed at the outset.
However, if that person does not become the holder of a qualification within a period of four years from the date of the transfer, the relief is clawed back and an additional 5pc duty along with interest is due from the date of the transfer.
In situations where the conditions for relief have ceased to be met within the six-year time frame, the relief no longer applies.
It is the responsibility of the transferee to advise Revenue and to pay the Stamp Duty (and any interest that has accrued) that would have been payable had the relief not been granted in the first place.
Revenue will take account of the circumstances surrounding the failure to comply in deciding whether the relief should be clawed back or not.
However, as a matter of course, it would be expected in the case of a lease that the terms of the lease would include
the necessary conditions to ensure that the person entitled to the relief would not be disqualified.
A transferee who wishes to make the case for an exceptional situation should write to Revenue outlining the exceptional circumstances.
Exceptional situations will be considered on their merits; for example, where a farmer becomes incapacitated to the point where he or she is unable to continue farming.
Where the transferee pays the full rate of Stamp Duty, ie 6pc, in the expectation that they will not acquire the required qualification within the four-year time limit but subsequently their circumstances alter and they actually do acquire it, they may claim a refund.
Revenue will only make a repayment where a valid claim is received within four years from the date the conveyance or transfer is stamped.
CONSANGUINITY RELIEF: KEY POINTS
Consanguinity Relief may or may not be available in certain circumstances as follows:
Transfers to say your son and his wife as joint tenants will not qualify, even in respect of the half interest passing to the son, because the daughter-in-law is not related to the transferor.
Consanguinity Relief may be claimed where property is being placed into a trust by parents for their child on the basis that the child becoming entitled to the entire beneficial interest in the property is related to the person transferring.
A dwelling being transferred as part of a farm transfer will be valued separately and will be subject to 1pc duty irrespective of whether the land actually qualifies for the relief or not.
The terms and conditions must be observed for a six-year period.
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