Farm Ireland

Friday 20 April 2018

Make use of stamp duty relief before June expiry

Michael Hough

Stamp duty relief for farmers was originally introduced in 2005 in a restricted form. It allows you to claim relief from stamp duty where you sell and buy lands in order to consolidate your farm holding. The relief also extends to gifts and exchanges of land where the relevant conditions are met. Now might be a good time to think hard about using this relief, since it is due to expire on June 30 next year. The way the country's finances are going, there are no guarantees that it will be back in the same form after this date.

In order to qualify for the relief, you must meet the following conditions:

  • The purchase and sale of the lands must take place within 18 months of each other.
  • A valid consolidation certificate, issued by Teagasc in relation to the sale and purchase, must be in place.
  • You must spend at least 50pc of your normal working time farming. The relief can also extend to the purchase of land by joint owners where not all of the joint owners are farmers. However, the relief does not apply to companies.

The relief operates as follows:

Where the sale takes place first and the purchase takes place within 18 months afterwards, no stamp duty is due provided the purchase price paid does not exceed the sale price. Where it does, stamp duty is payable on the excess only.

Where the purchase takes place before the sale, the stamp duty must be paid on the purchase. A claim for the repayment of the duty is made when the sale takes place.

The relief extends to the purchase of agricultural land, including farm buildings on the land and to land suitable for forestry.

The amount of the relief granted will be clawed back if the lands or part of the lands are disposed of within five years from the date on which the claim was made. Interest is also charged at the rate of 0.0273pc/day from the date of the disposal to the date that the clawback amount is paid. The clawback does not apply where lands are compulsorily acquired or where lands are transferred between spouses for the purpose of creating a joint tenancy.

This legislation was introduced in isolation without considering the Capital Gains Tax implication involved with the sale of land. This tax will of course have less impact now because of the reduction in the land values. However, it is important if you are considering buying and selling land in order to consolidate your holding that you take advice on the Capital Gains Tax implications involved.

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Example (see table 1, below)

A farmer sold 14ac of land in September last year for €120,000. He bought this land in 1986 at a cost of €30,000. In December last year, he bought 16ac for €130,000. All the conditions have been satisfied. There is a saving of €7,700 involved over the normal rate of stamp duty at 6pc.

Irish Independent