Revenue Note for Guidance

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Revenue Note for Guidance

Section 41 How conveyance in consideration of debt, etc., to be charged

(1) This section provides that where property is conveyed to any person—

  • in satisfaction of any debt due to the transferee, or
  • subject either certainly or contingently to the payment or transfer of money or stock, whether that money or stock is a charge or incumbrance on the property or not,

then the debt, money or stock is deemed to constitute the whole or part, as the case may be, of the consideration in respect of which the conveyance is chargeable with ad valorem duty.

(2) The section also provides that where a transferee acquires a beneficial interest in a company in circumstances where the transferee discharges or procures the discharge (whether directly or indirectly through a connected company) of any indebtedness of the company, the amount of that indebtedness (as well as any other consideration paid, if any) shall be included as consideration for the acquisition of the property (shares) on which stamp duty is payable.

The following examples demonstrate how duty is to be charged in cases involving the satisfaction or assumption of debts. In cases where an instrument is liable to 2 or more duties the Revenue Commissioners have the right to seek the highest duty.

Example 1

A sells B 4 acres in satisfaction of a debt of €32,000 which A owes to B. The chargeable consideration for the conveyance of the 4 acres is €32,000. As the property is non-residential the rate of duty is 2%.

Had B paid A €4,000 in addition to writing off the debt the chargeable consideration would have been €36,000.

If the value of the land had exceeded the value of the debt - say the value of the land was €40,000 - section 30 would have applied and, in consequence, the chargeable consideration would have been the value of the land i.e. €40,000. The rate of duty would still have been 2%.

Example 2

A sells non-residential property (value €80,000) to B for €65,000. B also agrees to pay off a debt of €15,000 which A owes to C. The chargeable consideration is €80,000 (€65,000 + €15,000). As the property is non-residential the rate of duty is 2%.

Where the debt assumed is a mortgage then duty is charged on the higher of —

  • the value of the mortgage debt assumed plus any consideration paid, or
  • the equity of redemption.

Example 1

A sells his house (value €235,000) to B for €220,000 in 2011. The house is subject to a mortgage of €15,000 which B also agrees to take over. The chargeable consideration is €235,000 (€220,000 + €15,000) and, as the property is residential, the duty is €2,350 (i.e. €235,000 × 1%).

However, if the mortgage had been greater than the value of the house (i.e. a negative equity situation) the Revenue Commissioners would, in practice, limit the charge to the value only provided a good case was made for the duty to be so limited.

Example 2

A gives B non-residential property (value €50,000). A debt of €15,000 is charged on the property. B agrees to assume that debt. As the equity of redemption (i.e. €35,000) exceeds the value of the debt assumed the chargeable consideration is the equity of redemption i.e. section 30 applies. The rate of duty is 2%.

Had the debt assumed been greater than the equity of redemption - say the debt assumed was €35,000 - the chargeable consideration would have been the value of the debt assumed as this section would have applied.

Relevant Date: Finance Act 2014