On budget day it was announced that the rate of stamp duty for transfers of non-residential properties was to be increased from 2% to 6%. Transitional measures were announced in the Finance Bill that followed to allow purchasers claim the 2% rate where a binding contract had been entered into prior to 11 October 2017 subject to it completing before 1 January 2018.
Whilst the increase to 6% was effective immediately from 11 October, the transitional measures do not become law until the Finance Bill is enacted. As a result, the position initially adopted by Revenue was that all non-residential transfers must be stamped at the higher rate of 6% with purchasers then having to claim a refund from Revenue for the additional 4% they had paid. The alternative would be to delay completion until the Finance Bill is enacted in order to stamp at 2%, with the added threat of a completion notice looming overhead.
Understandably, this has caused disruption for purchasers and their funders as the cash flow implications of stamping at 6% are significant – on a transaction of €1,000,000 an extra €40,000 would need to be found and this is clearly unfair on parties who had entered into contracts in reliance on the 2% rate before 11 October.
Thankfully, after effective lobbying Revenue has now confirmed that it will facilitate the making of stamp duty returns for qualifying transfers at 2%. Revenue will give a receipt for the duty paid, however, a Stamp Certificate will not be issued until the Finance Bill is enacted.
The following certificate is to be included in qualifying deeds:
“IT IS HEREBY CERTIFIED that this instrument was executed solely in pursuance of a binding contract entered into before 11 October, 2017”
Registration in the PRA
Typically the Land Registry would reject applications which do not have the appropriate stamp duty certificate attached to the deed. Accordingly, we opened up discussions with the PRA to ensure that applications could be lodged immediately and not rejected for want of a stamp certificate where 2% had been paid on a qualifying deed.
The attached Land Registry legal notice confirms that:
- The PRA will not reject the application on the grounds of Paragraph 2(2) of Legal Office Notice No. 8 of 2010 [however the application may be rejected if other grounds for rejection as set out in Paragraph 2 of the Legal Office Notice apply].
- The PRA will raise a query in relation to the Stamp Duty Certificate and point out that the application will proceed to registration as of the date of lodgement [Rule 60 of the LR Rules 2012] when the Stamp Duty Certificate is lodged. However, if the Stamp Duty certificate is not lodged by the 31st January 2018 the application will be rejected and if and when relodged the date of registration will be the date of relodgement.
The confirmations from Revenue and the PRA are welcome and should now mean that, subject to Revenue issuing Stamp certificates before 31 January 2018, qualifying transactions can complete with stamp duty being paid at the lower rate of 2% without risk to purchasers and their funders.
- Binding Contract for Non-Residential Property before 11 October 2017;
- Deed of Transfer includes appropriate certificate:
- Transfer completes before 31 December 2017;
- Stamp Duty Return is made paying 2% stamp duty – a stamp certificate will not be available;
- Transfer is lodged for registration in the PRA accompanied by a letter from the lodging solicitor:
- setting out the situation;
- enclosing a Receipt from Revenue confirming that the 2% duty has been paid and
- Undertaking that the solicitor will lodge with the PRA the stamp certificate when available from Revenue.
- Subject to Stamp certificate being lodged before 31 January 2018 and no other grounds for rejection of the dealing arising, the application should proceed with priority being secured from the date of lodgement. However, as above if the Stamp Certificate is not lodged by 31 January 2018, the application will be rejected. Further clarity is required from Revenue to ensure that this will be the case.
A link to Revenue eBrief No. 94/2017 can be accessed here.
Please click here to access the PRA legal Office Notice 2 of 2017.