IT was hoped the stamp duty "trade-in" scheme would rejuvenate the property market. But it would have prompted greater interest if it had totally exempted developers from stamp duty.
As it stands, the plan allows a developer to defer the payment of stamp duty if they accept a second-hand property in exchange or as part payment for a home within their own stock.
It is only when this "swapped" property is finally sold on that they will have to pay stamp duty. And the rate they will have to pay is based on the value of that property at the date of the actual trade-in.
But by doing this the scheme assumes the developer will be able to sell on the swapped property before the scheme expires in December next year.
This may not be the case for some in the current climate but under the legislation they will have to pay the stamp duty nonetheless.
Effectively, this means they could be left with additional property on their books -- and a tax bill they don't need.
The scheme also assumes the developer will be able to factor the stamp duty cost into the property price when they are trying to sell it. But this may not be feasible as property prices are dipping at the present time.
A more effective mechanism to stimulate activity in the market would have been to exempt developers entirely from stamp duty if they took on a second-hand property.
To do this effectively, the scheme would have to ensure that developers disposed of the property within a specific period.
Since the plan was introduced in April's Budget there has been an extremely low level of interest. It is understandable given that many developers would not have the capacity to hold second-hand housing stock on their books in a fairly stagnant market.
Also, in order for a developer to sign up to the scheme they must do a valuation of each of the properties.
This is understandable from the Revenue Commissioners' perspective but it imposes additional costs on the developer.
Such elements lessen the likelihood of the deferral scheme being used.
Emmet Scully is a partner in the business department at LK Shields Solicitors, practising in the area of corporate law and mergers, acquisitions and restructurings