Revenue Note for Guidance

The content shown on this page is a Note for Guidance produced by the Irish Revenue Commissioners. To view the section of legislation to which the Note for Guidance applies, click the link below:

Revenue Note for Guidance

Section 43 Further consideration in respect of substantial improvements not chargeable

This section limits the amount of stamp duty payable on certain conveyances on sale. The conveyances in question are those made for a consideration which is chargeable to ad valorem duty but also made for a further consideration relating to the improvement of the property being purchased. If that further consideration consists of —

  • a covenant by the purchaser to substantially improve or add to the property,
  • a covenant by the purchaser in respect of his or her having previously made substantial improvements or additions to the property, or
  • a covenant relating to the subject matter of the conveyance,

then that further consideration is not chargeable to stamp duty.

Prior to the enactment of section 112 of the Finance Act, 1990 - now sections 29 and 53 - this section was used to limit the amount of duty chargeable on the purchase of a newly constructed house which was not exempt from stamp duty under section 49 of the Finance Act, 1969 - now section 91A. In order to limit the duty payable a contract to purchase the site would be entered into. This contract would be drawn up in such a way that the purchaser would be entitled to have the site conveyed to him or her in consideration only of the purchase price of the site. This would be coupled with a covenant by the purchaser to erect a house on that site - i.e. to improve the site - and provided that the improvements remaining to be carried out at the time the contract to purchase the site was entered into were substantial then duty would be limited to the value of the site only. In practice provided the contract to purchase the site was entered into before the house was roofed the subsequent conveyance only attracted duty on the value of the site. However, following the enactment of section 112 this section (i.e. section 43) is now mainly relevant to commercial and industrial developments. The stamp duty position of such developments is as follows:

  • where the building on the site is not substantially completed at the date of signing of contracts and where the contract for the sale of the site and the building agreement are not interlocked, stamp duty will be assessed on the market value of the site together with the cost of any works done at the date of signing of the contracts. A certificate from the site architect should be produced, detailing the works performed and the cost of such works at the date of the sale;
  • where the building on the site is substantially completed at the date of signing of contracts,

    • and/or

  • the contract for the sale of the site and the building agreement are interlocked, stamp duty will be assessed on the entire consideration passing for the site and the building.

As a general guideline, properties will be regarded by the Revenue Commissioners as “substantially completed” where the cost of the building work completed exceeds 75% of the total cost of the building work agreed.

Example

A agrees to purchase a new unit in an industrial estate which is to be developed by the vendor. The agreed purchase price is €100,000. €25,000 of the purchase price is attributed to the cost of the site. Separate contracts are entered into between the vendor and the purchaser for—

  • the sale of the site, and
  • the construction of the unit on that site.

Each contract is independent of the other. At the time the contract to purchase the site is entered into building work has already commenced - approximately €20,000 has been spent on building works - but substantial works remain to be carried out. Stamp duty is chargeable on the cost of the site plus the value of the works completed at the date of the contract i.e. on €45,000. If the building works had been substantially complete at the date of the contract stamp duty would have been chargeable on the total consideration payable i.e. on €100,000. If the contract for the sale of the site and the contract for the building works had been interlocked (i.e. where the contracts are dependent or conditional on each other to the extent that the purchaser is not entitled to an assurance of the site without the building) stamp duty would have been chargeable on the aggregate of the consideration paid for the site and the building even if the building works had not been substantially completed.

Relevant Date: Finance Act 2014