Revenue Note for Guidance

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Revenue Note for Guidance

Section 46 Directions as to sub-sales

(1) Where a person contracts to purchase property and then sells it to a sub-purchaser before s/he has taken a conveyance of it, then, where the transfer is from the original seller to the sub-purchaser, duty is payable on the consideration paid by the sub-purchaser. Although not expressly stated in this section, the provisions of the section extend to a chain of sub-sales.

Example 1

A agrees to sell her house to B for €400,000. B, before taking a conveyance, contracts to sell the house to C for €435,000. At B’s direction the house is conveyed directly from A to C. The stampable consideration is €435,000 i.e. the consideration moving from C. As the property is residential the duty chargeable is €4,350 (€435,000 x 1%).

Example 2

A agrees to sell 10 acres to B for €80,000. An agreement is signed but before the conveyance is executed B enters into a contract with C for the sale of the land to C for €60,000 (say the market has dropped and B decides to get out). On closing, the conveyance is executed from A to C. The stampable consideration is €60,000 i.e. the consideration moving from C. As the property is non-residential the rate of duty applicable is 2%.

Example 3

A agrees to sell a site to B for €65,000. An agreement is signed but before the conveyance is executed B enters into a contract with C for the sale of the property to C for €45,000 (i.e. at undervalue). On closing, the conveyance is executed from A to C. As the conveyance is by way of gift (see section 30) the stampable consideration is the market value of the property i.e. €65,000. As the property is non-residential the rate of duty applicable is 2%.

(2) Provision is also made for a case where the property has been sold in parts or parcels to one sub-purchaser or to a number of sub-purchasers. Each part or parcel is only charged on the consideration paid by the sub-purchaser for such part or parcel.

Example

A agrees to sell her farm of 90 acres to B for €160,000. Before taking a conveyance B sells 50 acres to C for €100,000 and 40 acres to D for €70,000. At B’s direction A conveys 50 acres directly to C and 40 acres directly to D. The stampable consideration in respect of the conveyance to C is €100,000 (at the rate of duty applicable to non-residential property i.e. 2%) and in respect of the conveyance to D is €70,000 (at the rate of duty applicable to non-residential property i.e. 2%).

(3) Where a sub-purchaser takes a conveyance from the person who sold to him or her, and pays ad valorem duty on this conveyance, any further conveyance of the same property to the sub-purchaser by the original seller will be chargeable only with such other duty as it may be liable to, which duty shall not exceed the ad valorem duty.

Example

A agrees to sell her house to B for €130,000. B, before taking a conveyance, contracts to sell his beneficial interest in the house to C for €135,000. B conveys his beneficial interest in the house to C and C pays ad valorem duty of €1,350 (€135,000 @ 1%). Subsequently, A also executes a conveyance transferring her legal interest in the house to C. The conveyance from A is not chargeable to duty as it would not be regarded as a conveyance or transfer on sale.

(4) The consideration moving from the sub-purchaser, in a case to which subsection (1), (2) or (3) applies, is to be ascertained without regard to—

  • the value of any—
    • covenant,
    • power,
    • condition, or
    • arrangement,

relating to the subject matter of the conveyance which was not in the contract entered into by the original seller, and

  • any consideration the duty on which or on any part of which would be charged in accordance with section 42(2).
  • The result of ascertaining the consideration moving from the sub-purchaser in this way is that the sub-sale will not be for full consideration. Subsection (6) will then come into play with the result that the subsequent conveyance will be liable as a voluntary disposition inter vivos at the market value of the property conveyed.

Example

A contracts to sell property to B for €70,000. B contracts to sell the same property to C for €20,000 plus an annuity of €2,000 p.a. for B’s life.

As the annuity portion of the consideration is ignored the lump sum consideration of €20,000 is not adequate and the conveyance from A to C is stamped on the market value of the property i.e. €70,000.

(5) Consanguinity relief (see Schedule 1) does not apply to instruments effecting sub-sales. Neither does the relief for transfers between spouses apply (see section 96).

(6) Any conveyance to which subsection (4) applies is deemed to be a voluntary disposition inter vivos, and, therefore, chargeable on the market value of the property conveyed.

Relevant Date: Finance Act 2014