This article covers topical stamp duty issues, in particular

• the changes introduced by Finance Act 2013 in respect of contracts for the sale of land and
• issues arising from electronic-stamping.

Finance Act 2013 (“FA ‘13”) – “Special Land Provisions¹”

Prior to FA ’13 a contract for the sale of land was not an instrument within the charge to stamp duty. It was possible to either “rest in contract”, thereby deferring the charge to stamp duty until such time as a conveyance was put in place, or to avail of sub-sale relief even where full consideration was paid at contract stage. Stamp duty anti-avoidance provisions were contained in Finance (No. 2) Act 2008 but never became operational. In a surprise move without any Budget indication, FA ‘13 introduced anti-avoidance provisions similar to those contained in the earlier Finance Act. The provisions became fully operational with effect from 13 February 2013 - the date of the Bill’s publication. The provisions target three specific types of transactions.

Contract for the Sale of Land²

Where the holder of an estate or interest in land enters into a contract for the sale of that land and at least 25% of the consideration has been paid then the contract is chargeable with the same stamp duty as if it were a conveyance of the estate or interest in the land. The contract is not deemed to be a conveyance if within 30 days of the 25% payment, a stamp duty return is delivered in relation to a conveyance made in conformity with the contract and the stamp duty chargeable on the conveyance is paid. There is no guidance as regards the term “in conformity” and it is assumed that the conveyance should conform to the terms of the original contract.

Licence to Build³

Where the holder of an interest in land enters into an agreement with another person to develop land and at least 25% of the market value of the land has been paid (other than as consideration for the sale of the land) then the agreement is chargeable with the same stamp duty as if it were a conveyance of the estate or interest in the land.

The term “development” is defined as:-

1. "the construction, demolition, extension, alteration or reconstruction of any building on the land, or
2. any engineering or other operation in, on, over or under the land to adapt it for materially altered use”.

Agreement for Lease⁴

An agreement for a lease for any term exceeding 35 years is chargeable with the same stamp duty as if it were an actual lease made for the term and consideration mentioned in the agreement where at least 25% of the consideration has been paid. A lease made subsequently in conformity with the agreement is subject to a nominal stamp duty charge of €12.50⁵.

In all three cases, if the contract is rescinded or annulled then the stamp duty paid will be refunded. There is a 4 year time limit from the date the contract/agreement is stamped to claim a refund.

The legislation is not retrospective and it applies only to instruments executed on or after 13 February 2013. It does not apply to instruments executed solely in pursuance of a binding contract /agreement entered into before 13 February 2013.

The special land provisions have the effect of restricting the application of sub-sale relief to situations were less than 25% of the consideration for the sale of land has been paid at contract stage.

Electronic-Stamping (“E-Stamping”)

E-Stamping came into effect on 30 December 2009⁶ and on 7 July 2012 moved to self-assessment⁷. The Law Society Conveyancing Committee noted in December 2012 that practitioners continue to experience difficulties with electronic-stamping⁸.

E-Stamping requires the delivery of an electronic return in respect of every instrument that requires to be stamped and since 1 June 2011 a paper return may only be filed in very limited circumstances.

SI 234/2012 Schedule 1 Paragraph (i) lists the instruments required to be stamped, i.e.⁹

• instruments chargeable in respect of which stamp duty is due and payable,
• instruments chargeable which qualify for exemption or relief under Part 7, Chapter 1 SDCA¹⁰
• instruments chargeable which qualify for exemption or exclusion and also

1. convey an interest in land (including a voluntary conveyance), or
2. grant a lease of land for a term exceeding 30 years, or
3. assign a lease of land where the unexpired term exceeds 30 years.

SI 234/2012 Schedule 1, Paragraph (2) also lists certain instruments excluded from self-assessed stamping i.e. instruments:-

• creating a joint tenancy between spouses /civil partners in the family home,
• effecting a transfer of assets pursuant to a merger, cross border merger or SE¹¹ merger under section 87B(2) SDCA,
• effecting a conveyance, transfer or lease of a house, building or land to a housing authority or the Affordable Home Partnership under section 106B (2) SDCA,
• effecting the sale, transfer, lease or other disposition of any property, asset or documentation to or by the National Assets Management Agency/NAMA-subsidiary under section 108B(3) SDCA,
• granting a lease for any indefinite term or any term not exceeding 35 years of any dwellinghouse (part) at an annual rent not exceeding €30,000.

Schedule 1, paragraph (2) is not an exhaustive list of those instruments excluded from self-assessed stamping.

The Finance Act 2013¹² removed Revenue’s statutory power to require the delivery of a statutory declaration in the case of relief claimed under section 79 (associated companies relief), section 80 (reconstruction or amalgamation relief) or the application of exemption under section 80A (demutualisation of assurance companies). Between 7 July 2012 and 26 March 2013 the Revenue were entitled to request the delivery of a statutory declaration/ statement notwithstanding that the instrument was self-assessed.

Post Stamping Audits

Over the last 12 months there has been a noticeable increase in post stamping audit activity. Essentially, Revenue has moved from adjudicating to auditing claims for relief and this has penalty implications for both practitioners and taxpayers¹³.

Sufficient evidence should be assembled at the time of filing the stamp duty return to support the assessment of the liability to stamp duty in the event of a Revenue audit. It should be noted that there is a statutory requirement to retain records for six years¹⁴.

To date no guidelines have issued from Revenue indicating what would now be regarded as sufficient evidence to support a claim for relief. At the very least, we would recommend that there should be a signed statement confirming that the conditions of a relief were met on the execution date.

Revenue Clearances

In November 2012, the Law Society Conveyancing Committee confirmed that Revenue had indicated that it would continue to give “prior clarifications/confirmations (rulings on circumstances) in the same manner as it did before the introduction of self-assessment and e-filing”. It was also noted that the “expression of doubt” box on the stamp duty return could be used when making an e-filing and it was said that “this is a form of comfort also”.

In our experience, since January 2013 Revenue has taken a strict view in its application of the EOD¹⁵ legislation and no longer provide “comfort” via an EOD filing. If a clearance or confirmation is required it must be sought prior to the execution of the instrument¹⁶. Once an instrument is executed then it is self-assessable and an EOD filing would be regarded as invalid unless it is a genuine EOD within the terms of the SDCA¹⁷.

Tax Reference Numbers

A tax reference number and tax type in respect of every party to an instrument must be included in the return. Revenue is currently examining cases involving the improper use of tax reference numbers. The tax reference number requirement is relaxed in the case of:-

1) Non Resident Individuals

Where an individual is not registered with Revenue for tax purposes, is non-Irish resident and has no economic activity in Ireland (apart from the activity giving rise to stamp duty) then Revenue will register the Personal Public Service Number (PPSN) under tax type “Stamp Duty”. Documentary evidence from the Department of Social Protection¹⁸ confirming the validity of the PPSN must be provided. The Stamp Duty registration will not provide registration under any other tax head.

2) Foreign Incorporated Companies

In the case of non-Irish incorporated companies registration for Irish taxes is not required. Revenue issue a “customer reference number” solely for the purpose of filing a stamp duty return. This treatment only applies to non-Irish incorporated companies and does not apply to Irish incorporated companies which are non-Irish tax resident.

3) Receivership Cases

In the case of non-co-operating vendors failing to provide a valid tax number¹⁹ Receivers should approach Revenue for assistance. Each submission must be accompanied by documentary evidence showing that all reasonable steps were taken to obtain a valid tax number. Revenue may agree to the filing of a paper return which would include the purchaser’s tax number and the vendor’s full name and address. Consideration should be given to amending the special conditions of the contract for sale by removing the obligation to furnish the vendor’s tax number and in this regard Revenue’s guidelines should be relied upon.

Business Asset Purchase Agreements & Purchase Price Adjustment

In commercial transactions, the final purchase price may not be known until the completion accounts are finalised and this is usually some time post the execution of the chargeable instrument and seldom within the 44 day pay and file timeline. In such cases it is Revenue’s view that the consideration is unascertainable and that the stamp duty return should be filed on that basis. Therefore, stamp duty must be paid based on a best estimate of market value. Revenue should be notified in writing at the time of filing so as to mitigate any interest charged should the final purchase price be a greater value. Once the completion accounts are finalised an amended stamp duty return must be filed, the stamp duty liability recomputed and any shortfall paid – an “Amended Stamp Certificate” will issue. If the stamp duty was overpaid then a refund should be sought.

If the post-closing purchase price adjustment is contingent on the occurrence of future events such as an earn-out clause then in this scenario the consideration would genuinely be unascertainable at time of execution and the stamp duty return should be prepared on that basis, i.e. the liability calculated using market value rules.²⁰ An amended stamp duty return will not be required.

Summary – 2013 Key Points

Practitioners should be aware of the anti-avoidance measures when entering into land transactions, particularly in situations where a sub-sale structure is contemplated.

In addition, with the move to full self-assessment, it is critical that the taxpayer has established the basis of any liability to stamp duty and the basis for qualifying for any relief prior to filing the return. Evidence of the facts to support the assessment must be retained. If the taxpayer has a concern as to the application of a charge to stamp duty or relief, either clearance must be sought from Revenue in advance of execution or the return must be filed subject to an EOD.

Margaret Coleman is a Tax Manager with EY

Email: margaret.coleman@ie.ey.com

Ingrid O'Gorman is also a Tax Manager with EY

Email: ingrid.o'gorman@ie.ey.com

Tele: 353 (0) 1 475 0555

Website: http://www.ey.com/ie

1. Section 78 Finance Act 2013 inserted new Sections 31A, 31B & 50A Stamp Duties Consolidation Act, 1999 (“SDCA”).

2. Section 31A SDCA.

3. Section 31B SDCA.

4. Section 50A SDCA.

5. Schedule 1 SDCA 1999 - Lease Head of Charge Para 4.

6. Finance Act 2008 Section 111(1), Finance (No. 2) Act 2008 Section 79(2) & Schedule 5 paragraph 5(d) inserting Section 17A SDCA & SI 476/2009.

7. Finance Act 2012, Section 107 and Schedule 3 and S.I.234/2012.

8. Law Society Gazette December 2012, Practice Notes page 51.

9. SI 234/2012 Regulation 3 & Schedule 1, Para (1).

10. Part 7, Chapter 1, SDCA captures sections 79–83C inclusive.

11. Societas Europaea (“SE”) - European public-limited liability company.

12. Section 77 Finance Act 2013 effective from 27 March 2013.

13. Sections 8, 8A and 134A SDCA.

14. Section 128A SDCA.

15. “EOD”–Expression of Doubt, Section 8C SDCA.

16. Clearance must be obtained from the Large Cases Division rather than Stamp Duty Technical where the TELLAayer is dealt with by Large Cases.

17. An EOD may only be filed where there is a genuine doubt over a legislative interpretation affecting a stamp duty liability or entitlement to relief or exemption. Both the return and the EOD letter must be submitted within 44 days of executing the instrument otherwise the EOD is invalid.

18. The non-resident must apply for a PPSN to the Department of Social Protection. (cis@welfare.ie).

19. Tax Reference Numbers and Receivership cases 16 August 2013.

20. Section 44, SDCA.