Revenue Certificates in Deeds

Introduction

This article sets out the treatment of Revenue Certificates in Deeds in relation to stamp duty. It outlines the situations where certification is necessary and gives the rationale behind the wording of the various Revenue Certificates involved.

Historical Background

The concept of certification in deeds for stamp duty purposes first came into use as far back as 1910. Under the Finance (1909-10) Act 1910 lower rates of stamp duty were introduced for property transactions under a certain value and in the absence of what is commonly known as the “transaction certificate” the maximum stamp duty rate was payable.

Over time certification in deeds has been expanded to identify

• the type of property being transferred under a deed
• the nature of the transaction involved and
• situations where certain exemptions or reliefs from stamp duty are being claimed.

The rationale behind certification in deeds is that the maximum rate of stamp duty will be chargeable unless the correct certificates are endorsed to support the lower rate or exemption being claimed.

The wording of the current Revenue Certificates is set out in Leaflet SD10 which is available on our website at www.revenue.ie. The different forms of certification that currently apply are described below.

Transaction Certificate
(Nos. 8A-D in Leaflet SD10)

This was the first form of certification introduced for stamp duty purposes and one that practitioners will be most familiar with. Originally this certificate dealt solely with the amount or value of the transaction but now it also identifies whether the property is residential or non-residential in nature since the introduction of different rates of duty for residential and non-residential property.

The rationale for this certificate is to prevent the breaking up of a larger transaction into a number of smaller transactions in order to avoid a higher rate of duty. However, in a mixed property situation the residential part of the transaction is not aggregated with the non-residential portion for the purposes of determining the appropriate rate of duty. The consideration should be apportioned between the residential and non-residential elements and each type of property is separately certified to the applicable threshold and the appropriate rate of duty is chargeable in respect of the residential and non-residential parts of the transaction. The current rates of stamp duty are included in the Leaflet SD10.

The position where contents of a property are acquired is that they are to be taken into account for the purposes of the threshold to be inserted in the transaction certificate even though the contents themselves do not attract a charge to stamp duty where they pass by delivery. The contents of residential property are deemed to be residential property for aggregation purposes.

The wording of the transaction certificate should be adapted in the case of a lease or gift.

Certificate under Section 29/53 Stamp Duties Consolidation Act 1999
(Nos. 2A/B or 3A/B in Leaflet SD10)

Section 29 (in the case of a conveyance / transfer) and section 53 (in the case of a lease) apply to the acquisition of a site where there is an arrangement to build a house on the site. Under these sections a charge to stamp duty is imposed on the aggregate of the consideration paid for the site and the consideration paid in respect of the building of the house on the site.

Both sections have similar wording except that section 29 deals with conveyances / transfers and section 53 deals with leases. The reason for this apparent duplication is that conveyances / transfers and leases are chargeable under separate headings in the Stamp Duties Consolidation Act 1999.

Every instrument chargeable as a conveyance / transfer or lease must contain a certificate that section 29/53 either applies or does not apply to the deed. Additional certification will be required to determine the appropriate stamp duty rate which applies.

Occupancy Certificate
(Nos. 7A-C in Leaflet SD10)

This certificate is required in order to obtain the reduced stamp duty rates in the case of the acquisition of a house by a first time buyer or other owner-occupier.

The certificate may be given where:

• the property is to be occupied as a person’s only or principal place of residence for a period of 5 years from the date of the instrument,
• the occupancy is by the purchaser or a person in his right and
• no rent is to be derived from the property other than rent received after 6 April 2001 under the rent-a-room scheme introduced under the Finance Act 2001.

Under the rent-a-room scheme the purchaser or the person in right of the purchaser must continue to occupy the property as his principal place of residence while deriving rent from the letting of part of the property.

A clawback, of an amount equal to the difference between the higher rate of stamp duty and the reduced stamp duty paid, arises where rent, other than under the rent-a-room scheme, is derived from the property during the 5 year period.

First Time Purchaser Certificate
(No. 6 in Leaflet SD10)

In this certificate a person certifies that he/she is a first time purchaser in order to avail of the reduced rates of stamp duty for first time buyers. An occupancy certificate is also required in conjunction with this certificate.

The term “first time purchaser” is defined in section 92B Stamp Duties Consolidation Act 1999 (which was inserted by the Finance (No.2) Act 2000). The definition broadly includes a person who has not on any previous occasion, either individually or jointly, purchased or built on his/her own behalf a house in the State or abroad. Where there is more than one purchaser each of the purchasers must come within the scope of the definition in order to avail of the reduced rates.

There are a number of special situations to which the first time purchaser relief applies on a deemed basis. The category of persons originally catered for was a spouse to a marriage which was the subject of a judicial separation or a decree of divorce. The Finance Act 2001 extended the legislation to situations where there is a decree of nullity or a deed of separation.

The effect of this provision is to grant first time buyer relief to a spouse in any of the above situations in the case of the first acquisition of a house following the separation / divorce / nullity where that spouse has:

• left the former family home and
• not retained any interest in that home

and the other spouse continues to occupy the former family home since the separation / divorce / nullity.

Exemption for new grant-size houses
(No.1 in Leaflet SD10)

There is an exemption from stamp duty in Section 91 Stamp Duties Consolidation Act 1999 for the acquisition of new grant-size houses. The exemption is available for all owner-occupiers whether first time buyers or not.

The certification required to avail of the exemption confirms that:

• the house is newly erected
• a floor area certificate (must not exceed 125 sq.m.) has issued by the Department of the Environment and Local Government and
• the occupancy criteria previously referred to has been satisfied.

The clawback provisions apply where rent, other than rent under the rent-a-room scheme, is obtained during the five years after the date of the acquisition.

Relief for new houses with no floor area certificate
(No.2A/B or 4A/B in Leaflet SD10)

Section 92 Stamp Duties Consolidation Act 1999 provides that the chargeable consideration in the case of the purchase of a non-grant size house for owner occupation is:

• 25% of the total consideration in the case of the purchase of a completed house subject to certification that the house is newly erected and that sections 29 / 53 and section 91 do not apply. An occupancy certificate is also required.
  or
• the greater of (i) the site consideration or (ii) 25% of the aggregate of the site consideration and the consideration paid for the building of the house, where it is certified that section 29 / 53 Stamp Duties Consolidation Act 1999 applies. An occupancy certificate is also required.

Stamp duty will then be chargeable on the basis of the reduced consideration (exclusive of VAT) at the appropriate rates for first time purchasers or other owner-occupiers subject to the appropriate certification already referred to. The full range of certificates required is set out in Table 2 in Leaflet SD10.

The clawback provisions apply where rent, other than rent under the rent-a-room scheme, is obtained during the five years after the date of the acquisition.

Second-hand house certificate
(No. 5 in Leaflet SD10)

This certificate confirms that the transaction relates to the purchase of a house and is required in conjunction with the owner occupancy certificate and / or the first time buyer certificate where the benefit of the reduced rates are claimed in connection with the purchase of a second-hand house.

The full range of certificates is set out in Table 2 in Leaflet SD10.

The higher 9% rate of stamp duty applies in the case of an investor acquiring a second-hand house regardless of the consideration paid.

Reduced rates for New Houses acquired by investors
(No.2A/B or 4C/D in Leaflet SD10)

Under the Finance Act 2001 reduced stamp duty rates were introduced for new houses acquired by investors. The reduced rates are set out in column 4 of Table 1 in Leaflet SD10 and apply to instruments executed on or after 27 February 2001. The certification confirms either:

• in the case of a completed house that the house is newly completed and that section 29 / 53 does not apply
  or
• that section 29 / 53 applies where there is a site acquisition combined with a building contract.

The charge to duty arises on the entire consideration paid for the house exclusive of VAT. The appropriate rate is then determined on the basis of the threshold included in the transaction certificate.

Relationship Certificate
(No.10 in Leaflet SD10)

Stamp duty at half the normal rate is chargeable where the relationship certificate is included in a deed. This is known as consanguinity relief and in order to avail of this relief each of the persons to whom the property is transferred must be related to each of the transferors to the required degree. The degree of relationship is mainly based on direct ancestry and extends to nieces / nephews but does not include cousins or in-laws. The relief is not available where only one of the parties is related to the required degree and there is no provision for granting the relief to the part of the transaction between the related persons.

The relief is provided for in paragraph 15 of the heading “Conveyance or Transfer on sale of any property ....” in Schedule 1 Stamp Duties Consolidation Act 1999. The relief is available in the case of either a sale or a gift of property but does not apply to a lease or to the transfer of stocks or marketable securities.Adjudication is required where the relief is sought.

Young Trained Farmer Exemption
(No. 11 in Leaflet SD10)

Section 81 Stamp Duties Consolidation Act 1999 provides for an exemption from stamp duty on certain conveyances / transfers of property to young trained farmers. The parties do not have to be related and the relief applies to both sales and gifts but does not apply to leases. Full details of the relief are contained in Leaflet SD2 and the relevant qualifications must be satisfied as at the date of the transfer.

Where relief is claimed the instrument should contain a certificate that section 81 applies. Adjudication is also required.

Woodlands Relief
(No. 12 in Leaflet SD10)

This relief is contained in section 95 Stamp Duties Consolidation Act 1999 which excludes from the charge to stamp duty that portion of the consideration attributable to trees growing on lands for commercial purposes. The relief only applies to sales and the consideration must be apportioned between the lands and the trees and the rate of duty chargeable on the lands is determined by the amount of the total consideration for the sale.

Where this relief is claimed the instrument should contain a certificate that section 95 applies. While the section does not provide for adjudication it is in practice required.

Reliefs not requiring certification

Certification does not arise in the case of every relief or exemption provided for under the Stamp Duty code. Listed below are a number of examples of situations where there is no statutory requirement for having a certificate in the deed.

• Spouse exemption (section 96 Stamp Duty Consolidation Act 1999) - a certificate may be included if desired to confirm the relationship of the parties. Spouse transfers do not require to be presented for stamping in order to obtain the exemption.
• Relief for intra-group transfers (section 79 Stamp Duty Consolidation Act 1999) - no certification is required in the deed but adjudication is necessary. A statutory declaration setting out the basis of the claim should be filed.
• Relief for company reconstructions/amalgamations (section 80 Stamp Duty Consolidation Act 1999) - no certification is required in the deed but adjudication is necessary. A statutory declaration setting out the basis of the claim should be filed.

Exemption for transfer of site from parent to child for building purposes
(No. 9 in Leaflet SD10)

This exemption was introduced under the Finance Act 2001 by the insertion of section 83A Stamp Duties Consolidation Act 1999. It applies to instruments executed on or after 6 December 2000 and adjudication is required. The certificate required to obtain the exemption confirms that:

• a site only is being transferred
• the transferee is a child of the transferor
• the value of the site does not exceed £200,000
• the purpose is the erection of a house to be occupied as the only or main residence of the transferee and
• this is the first occasion that the child has claimed this relief.

Exemption from Fixed Duty of £10
(Nos.13A-D in SD10)

Instruments, which are liable to the fixed duty of £10 under the following headings in Schedule 1 Stamp Duties Consolidation Act 1999, are exempt from this charge where they bear the appropriate certificate.

“Conveyance or Transfer of any kind not already described in Schedule 1".

“Exchange” (other than an exchange chargeable under section 37 Stamp Duties Consolidation Act 1999. This section imposes a charge to ad valorem on exchanges involving immovable property.).

“Release or Renunciation of any property, or right or interest in any property”.

“Surrender of any property, or of any right or interest in any property”.

The transactions involved do not attract ad valorem duty as they are not on sale or by way of gift. There is no need to present such instruments for stamping where they are so certified.

Transitional Certificate

Under the Finance (No.2) Act 2000 transitional arrangements apply where the purchase of a house was the subject of a contract evidenced in writing prior to 15 June 2000. Under these arrangements a person who was disadvantaged as a result of the stamp duty changes can opt to have the rates in force prior to 15 June 2000 applied to the instrument of conveyance/lease provided that the instrument has been executed on or before 31 July 2001 (extended from 31 January 2001 under Finance Act 2001).

To avail of the transitional arrangements the instrument of conveyance/lease must contain the following certificate:

“It is hereby certified that this instrument was executed solely in pursuance of a contract evidenced in writing prior to 15 June 2000".

Incorrect Certificate

Section 8 Stamp Duties Consolidation Act 1999 requires full disclosure of all the facts and circumstances at the time of stamping. Penalties can be incurred by either the parties to a deed or any person involved in the preparation of a deed where incorrect information is furnished or non-disclosure occurs.

Under section 17 Stamp Duties Consolidation Act 1999 the furnishing of an incorrect certificate for stamp duty purposes is a Revenue offence which may be subject to the sanctions provided for in section 1078 Taxes Consolidation Act 1997.

Further Information

For further information, please contact

Capital Taxes Division,

Stamp Duty Customer Service Unit,

Stamping Building,

Dublin Castle,

Dublin 2.

Dublin Office:

Telephone: 01 6792777

ext. 48552 / 48176 / 48093

Fax: 01 6793261

Cork Office:

Telephone: 021 4968783

ext. 73191 / 73142 /73103

Fax : 021 4318088