Chartered
Tax
Consultant
Stage 2 Module 8
Capital Acquisitions Tax and Stamp
Duty
Presenter Name – Carol Hogan
13th and 14th March 2012
Chartered Accountants House
www.charteredaccountants.ie
EDUCATING
SUPPORTING
REPRESENTING
Learning Objectives
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Capital Acquisitions Tax
CATCA 2003
Gift Tax and Inheritance Tax
Key Charging Sections
Calculation of CAT
Payment and Filing
Learning Objectives
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Stamp Duty
SDCA 1999
Charge to Stamp Duty
Heads of Charge
Calculation of SD
Compliance Obligations
CAT Introduction
• CAT is payable by beneficiaries of gifts
and inheritances
• CATCA 2003 – charge to CAT when a
person becomes entitled in possession to
“any benefit”
• CATCA 2003 – 120 Sections
CAT Terms
•
Person making Gift
•
Person receiving Gift
Person making Inheritance •
•
Person receiving
Inheritance
•
• Benefits – gifts or
inheritances
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• Tax Free Thresholds
• Other legislation
Disponer
Beneficiary/Donee
Doner/Disponer
Donee/Successor
S 2CATCA – “any
estate income or
right”
• Group threshold
• Succession Act 1965
Succession Act 1965
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Knowledge of Succession Act required
Administration of Estates
Spouses and Children’s Rights
Rules of Intestacy
Doctrine of Lapse
Administration of Estates
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Personal Representatives
Executor or Administrator
Duty to prepare estate accounts
Inland Revenue Affidavit CA24
Lodged in Probate Office
Assets and Liabilities of deceased
Administration of Estates
• Grant of Representation
• Will -Testate – Grant of Probate
• No Will - Intestate or no executor
appointed – Grant of Administration
• Personal Reps have legal authority to
deal with the estate
• Estate divided between beneficiaries
Administration of Estates
• Finance Act 2010 – significant changes
• CA 24 (Inland Revenue Affidavit)
submitted to Probate Office wef 14/6/2010
• CA 24 – details of estate and beneficiaries
• Probate Office sends IRA details to
Revenue when Probate issued
CPCROC Act 2010
• Civil Partnership and Certain Rights and
Obligations of Cohabitant’s Act 2010
• Effective 1st January 2011
• Succession Act 1965 amended
• Civil Partner’s succession rights
Spouse & Children Legal Rights
Spouse /CP Legal
Entitlement – No
Children
Spouse/CP where
children - Legal
Entitlement
Children
Testate
S 115 succession Act
1965 -½ net estate inc
Family Home
1/3rd net estate inc
Family Home
Intestate
Entire Estate
S 117 Succession Act
1965 Right to apply to
Court
1/3rds Estate
between them
2/3rds Estate
Rules of Intestacy
• Sections 67-73 Succession Act 1965
• Rules to determine next of kin
• Where no surviving spouse/CP or children
– parents inherit the estate
• Where no surviving spouse C/P, children
or parents – siblings inherit the estate
• Legislation sets out next of kin rules
where no spouse, C/P, children, parents
or siblings
Doctrine of Lapse
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A benefit lapses when it fails
Intestate Estates – rules of intestacy apply
Benefit will never lapse
Testate Estates – a benefit lapses if the
beneficiary has died before the deceased
• Lapsed benefits falls into the residue
• Where residue lapses – rules of intestacy
apply
Doctrine of Lapse
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Exception to doctrine of lapse
Sec 98 Succession Act 1965
Applies only to testate estates
“Issue” = lineal descendant, child,
grandchild, great grandchild……
• Benefit does not lapse where
predeceased child has children
• Benefit falls into pre deceased’s will
Exception to Doctrine of Lapse
• Sec 42 CATCA 2003 - where Sec 98 applies
• Benefit taken directly from deceased as
disponer (not from predeceased)
• Predeceased deemed to have survived
deceased for Sec 98
• Sec 42 does not impose a double CAT
charge
• Group threshold is that of deceased
Territoriality
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Sec 6 CATCA 2003 – Gifts
Sec 11 CATCA – Inheritances
Residence and Domicile
Rules pre 1/12/1999 – domicile based
New regime post 1/12/1999 based on
residence
Residence – Summary
• Residence – Sec 819 TCA 1997
• ≥183 days in current year or
• ≥ 280 days in aggregate for current and
prior year
• A day is counted if present at any time
during the day
• Ordinary Residence – Sec 820 TCA 97
• OR if resident for 3 consecutive years
Domicile
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General law concept
Complex legal issue
Distinct from nationality or residence
Domicile of origin at birth
Domicile of choice must be acquired
Intention to reside permanently
Domicile of origin can be reactivated
Pre 1999 CAT Rules
Example
• DT created in 1990 by UK domiciled
settlor
• Beneficiaries of DT are children and
grandchildren of settlor
• DT appointed a house to Irish resident
daughter of settlor in 2003
• Gift of house is chargeable to CAT as it is
an Irish situated asset
Pre 1999 CAT Rules
• What are the pre 1/12/1999 rules?
• CAT charged if disponer was Irish
domiciled or the asset was situated in
Ireland
• Date of gifts for discretionary trusts is the
date the DT was created
• Is the gift taken from DT set up pre
1/12/1999?
• Was settlor domiciled outside Ireland?
Pre 1999 CAT Rules
Example contd
• DT created in 1990 by UK domiciled
settlor
• Beneficiaries of DT are children and
grandchildren of settlor
• DT appointed cash from UK bank account
to Irish resident daughter of settlor in 2010
• Gift is not chargeable to CAT as the DT is
governed by old territoriality rules
CAT Territoriality Rules
• Sec 6 CATCA 2003 /Sec 11 CATCA 2003
• Gifts or inheritances taken on or after
1/12/1999 are within the charge to tax if:
• Disponer is resident or ord resident in
Ireland at date of disposition or
• Beneficiary is resident or ord resident in
Ireland at date of gift or inheritance or
• Assets are Irish assets
Irish Assets
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Irish situate assets include:
Property situated in the State
Shares registered in Ireland
Bank accounts in Irish financial
institutions*
* Exception to this under Irl/US DTA – where
decd is US domiciled the deposits accounts are
situated where disponer was domiciled
Discretionary Trusts
• Discretionary Trust created pre 1/12/1999
• Assets added to DT after 1/12/1999
• Which residence rules apply to the “new
assets”?
• New residence based territoriality rules
apply if “new assets” appointed to
beneficiaries of DT
Non domiciled Individuals
• Irish resident who is not Irish domiciled
• Deemed to be non resident until Irish
resident for 5 consecutive years
• Non Irish domiciled individuals can be
outside charge to CAT on worldwide
assets
Klara
• Is disponer Irish resident or
ord res?
• Is beneficiary Irish resident or
ord res?
• Is the property Irish?
• Is beneficiary Irish domiciled?
• Has Klara been resident for 5
cons years?
• Does Irish CAT apply?
• NO
• YES
• NO
• NO
• NO
Double Taxation
• Relief under DTA or unilateral relief under
Sec 107 CATCA 2003
• DTAs with UK and USA only
• Double tax relief applies where a liability
to CAT arises in Ireland and another
jurisdiction
• UK inheritance tax on estate of UK
domiciled individual who was resident in
Ireland
Taxable Gifts and Inheritances
• CAT is a tax on beneficiaries of gifts and
inheritances
• Sec 5(1) Gifts
• Sec 10(1) CATCA 2003 Inheritances
• Date of gift or inheritance has implications
for CAT treatment including due date for
tax
Taxable Gifts and Inheritances
• A person takes a gift or inheritance :
• Where under any disposition
• A person becomes beneficially entitled in
possession
• Otherwise than on a death(gift) or on a
death (inheritance)
• To any benefit
• Otherwise than for full consideration
Disposition
• Sec 2 CATCA 2003
• Any act or omission resulting in a
reduction in the value of the person’s
estate
• Property owner fails to evict squatter = act
of omission by owner
• Squatter acquires a taxable benefit under
“adverse possession”
Disposition
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Sec 2 CATCA 2003
Disposition includes:
A transfer
Any trust
A disposition under a Will
Payment of money
“Otherwise than for full consideration”
• No CAT liability if full market value paid for
the benefit
• Gift or Inheritance tax is payable where no
consideration or less than full market
value consideration paid for the benefit
Date of Gift/Inheritance
• Date on which beneficiary becomes
beneficially “entitled in possession” to the
benefit
• Sec 2 CATCA 2003
• “having a present right to the enjoyment of
property as opposed to having a future
such right”
Date of Gift/Inheritance
• Date of gift is the date the gift is made
• Date of inheritance is usually the date of
death of the person on whose death the
benefit is taken
• Death of disponer
• Death of life tenant
Date of Gift/Inheritance
• Where a disponer dies within 2 years of
making a disposition
• The gift made becomes an inheritance
• Date of the gift is the date of the
inheritance
Date of Gift/Inheritance
• Date of gift/inheritance are important
• The date determines the thresholds; rate of
tax and Finance Act to apply
• 2009 – 2 CAT rates applied
• Valuation date can be different
Date of Gift/Inheritance
CAT Rate
20/11/2008 – 7/4/2009
22%
8/4/2009 and later
25%
From 7/12/2012
30%
Examples
Gift or Inheritances made
Date
Gift of house made to John by Kevin
on 16th May 2011
May 2011 Gift
Pat dies on 18th May 2011 and leaves 16th May 2011
a cash legacy of €50,000 to Miriam
Inheritance
Michael gifts property to Jim for life
on 20th July 2011 with remainder to
Joe
Jim dies on 21st December 2011
20th July 2011 Gift
21st December 2011
Inheritance (taken on a
death) from Michael
Valuation of Property
• Assets must be valued on the valuation
date
• For inheritances the valuation date is
often different than the date of inheritance
• Market value is used for CAT purposes
• Special ruled for valuation of private
companies
• Surcharge where assets are undervalued
Valuation of Property
• Sec 26 CATCA 2003
• MV = price which property would fetch if
sold in open market
• On the date on which property is to be
valued
• In such manner and subject to such
conditions as might reasonably be
calculated to obtain for the vendor the
best price for the property
Valuation of Property
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Obtain professional valuations
Open market valuation
Revenue may challenge valuations
Commissioner of Valuation
Estate may value assets on both date of
death for IRA and on valuation date* for
CAT
• Relevant now - in times of falling values
*eg Grant of Probate date
Valuation Date
• Sec 30 CATCA 2003
• Date on which assets are valued for CAT
• Gifts – Sec 30(1) CATCA 2003 - VD is
generally date of gift
• Valuation Date for Inheritances is more
complex
Valuation Date Inheritance Tax
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•
•
•
Sec 30(2) CATCA 2003
Date of death = Valuation Date for
Donatio Mortis Causa – dying wish gift
Where a power of revocation not
exercised, the date of disponer’s death is
the valuation date – S39 CATCA 2003
Valuation Date Inheritance Tax
• Valuation Date is generally the date of
date where property passes under
operation of law:
• Property is held as joint tenants – on
death of joint tenant
• Remainderman taking property on death
of life tenant
Valuation Date Inheritance Tax
• In other cases the valuation is the earliest
of:
– Date the subject matter can be retained
for the benefit of the beneficiary
– Date the subject matter is actually
retained for the beneficiary
– Date the benefit is transferred to the
beneficiary
Date of Retainer
• The date on which the personal reps are
in a position to pay over the benefit to the
beneficiary
• Beneficiary is entitled to demand delivery
on the Valuation Date
Case Law – Date of Retainer
• Lord Advocate v Wotherspoon’s Trustees
(1930) SLT 82
• Something different from holding or retention
• Something analogous to actual delivery or
payment
• Legatee should have beneficial enjoyment of
legacy through hands of trustees
• Example – holding by executor of legacy on
account of legatee’s disability
Valuation Date
• For inheritances, the valuation date is
commonly the date of the Grant of
Representation*
*Testate = Grant of Probate - Executor
*Intestate = Grant of Administration Administrator
Advancements
• Benefit paid to beneficiary prior to date of
Grant of Representation
• Valuation date is accelerated
• Advancement = part payment of entire
benefit
• CAT on total benefit calculated and
apportioned between part paid and part
retained
Valuation Date
• Valuation date may be deferred
• Litigation is common in Estates
• S 117 CATCA Succession Act 1965 –
child takes case for parent’s moral duty to
provide
• Claim by spouse/challenge on
will/squatter claims
• Estate assets cannot be retained until
litigation settled
Estate-> 1 Valuation Date?
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Yes – an estate may have >1 VD
Date of death 14th March 2011
Grant of Probate 30th July 2011
House to niece who is living in it
Cash Sum to nephew paid 30/6/2011
AIB shares to sister
Investment property to be sold and cash
to brother
• Residue to local church
Estate-> 1 Valuation Date?
Property
Valuation Date
House to niece
Date of death 14th March 2011
Cash Sum to nephew Date of payment -30th June 2011
AIB Shares to sister
Date of Grant of Probate 30th July
2011
Proceeds of
investment property
14th September 2011 date of sale of
house
Residue to local
church
Earliest date is Grant date
Date residue is retained for benefit of
church
Valuation Date
• Valuation date for a DT is the date the
appointment is made from the trust
• Date of gift or inheritance determines
group thresholds, rates of tax and reliefs
• For inheritances, valuation date may not
be the date of the inheritance
• Earlier example – different Valuation
dates but same date of inheritance
Taxable Value
• Sec 28 and Sch 2 CATCA 2003
Start with
Market Value on Valuation Date
Less
Liabilities, Costs and Expenses
Equals
Incumbrance-Free Value
Apply
Limited Interest Factor
Less
Consideration
Equals
Taxable Value
Liabilities Costs & Expenses
• Sec 28(1) CATCA 2003
• Deduct liabilities costs and expenses
“properly payable out of” benefit from MV
• Legal costs, solicitors, stamp duty,
accountant’s fees for determining tax,
valuer’s costs etc
• Funeral expenses, debts including tax
Liabilities Costs & Expenses
• Sec 28(5) CATCA 2003
• Deductions not allowable
• Expenses which the beneficiary gets
reimbursed
• Expenses created by beneficiary
• Tax, interest or penalties charged under
CATCA 2003 or related costs
Liabilities Costs & Expenses
• Responsibility to discharge expenses of
estate - inheritances
• S 46 and First Schedule Succession Act 1965
• Rules as to Application of Assets
• General costs out of residue first
• Then pro rate out of remaining assets
• Liability secured on asset deducted first
against asset
• Testator may direct otherwise
Liabilities Costs & Expenses
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Assets left by will
Apartment MV €250k with mortgage of €75k
Shares and home MV €540k
Funeral Costs €10k and Legal Fees €10k
Property
MV
Apartment €250k
Liabilities IFV
€110k
€140
Taxable
Value
€90
Incumbrance Free Value
• Calculate IFV
• For limited interests* – factors in Schedule
1 CTACA 2003 applied to IFV to arrive at
taxable value of limited interest
* Limited interest = use or right to asset for
a limited period of time – includes life
interests and interest for specified time
Deduction for Consideration
• Sec 28(2) CATCA 2003
• Consideration paid by beneficiary to
disponer or third party is deducted from
the IFV to arrive at taxable value
• Liability of disponer which beneficiary
undertakes to discharge
• Other liabilities under terms of disposition
• Consideration paid to third party deemed
to come from original disponer
Example - consideration
• Mary inherits a property from her father in
2010 with a MV of €300,000
• Mortgage of €30,000 attaches to house
• Terms of will dictate that Mary pays
€100,000*to her brother in consideration
of receiving the property
• What is the taxable value?
*Brother takes benefit of €100k from his father
Example - consideration
Start
with
Less
Market Value on
Valuation Date
Liabilities, Costs and
Expenses
€300,000
€30,000
Equals Incumbrance-Free Value €270,000
Apply
Limited Interest Factor
Less
Consideration
Equals Taxable Value
n/a
€100,000
€170,000
CAT Exemptions
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•
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•
Small Gift Exemption
Married couples/Civil Partners
Dwelling House Exemption
Agricultural Relief (Stage 3)
Business Relief (Stage 3)
Small Gift Exemption
• Sec 69 CATCA 2003
• Gifts only – does not apply to
inheritances
• Annual exemption of €3,000
• Deducted in arriving at taxable value
• Used for gifts to children/grandchildren
• Group threshold not reduced
Small Gift Exemption
• Available to each beneficiary –gifts can
be made by one donor to different
donees
• No clawback if doner dies within 2 years
• Inter vivos trust – exemption available
31/12/1978 – 31/12/1998
€635
1/1/1999-31/12/12002
€1,270
1/1/2003 to date
€3,000
Married Couples
• S 70 and 71 CATCA 2003
• Gifts and inheritances between spouses are
exempt
• Separated couples still legally married have
spousal exemptions and succession rights
• Check that spouses have a valid marriage
• S 88 CATCA 2003 CAT exemption for transfers
on dissolution of marriage
• Disposals between divorced “spouses” taxable
CPCROC Act 2010
• Sec 70 and 71CATCA 2003 amended
• Exemptions for gifts/inheritances between
spouses extended to Civil Partners
• Valid registered CP
• Decree of Dissolution
• Succession rights for CPs until dissolution
• Sec 88 CATCA 2003
• Exemptions following dissolution of CP
Dwelling House Exemption
• Sec 86 CATCA 2003
• Exemption for gift or inheritance of a
dwelling house and up to 1 acre
• Conditions
• Additional conditions for gifts after 20th
February 2007
• Clawback of relief
• Replacement of dwelling house
Conditions
• Donee must have occupied dwelling house
continuously for 3 years prior to G/I as MR
• Replacement property – modified rule of 3 out
of 4 years prior to gift/inheritance in both
properties
• Donee has no interest/entitlement to another
dwelling house at date of G/I
• Donee must reside for at least 6 years in
property as MR (n/a if >55 years of age)
Deemed periods of occupation
• Absence through working abroad
• Absence due to long term medical care in
hospital, nursing or convalescent home
• Absence due to employer imposing a
condition of employment requiring donee
to reside elsewhere
Gifts – additional conditions
• Sec 86(3A) CATCA 2003
• Restrictions on use of dwelling house
relief for gifts only
• Applies to gifts taken on or after 20th
February 2007
Gifts – additional conditions
1. “Family home” restriction applies where
the donee occupies a dwelling which
was the donor’s only or main residence
Mother gifting family home to her son
who has lived with her for 25 years does
not qualify.
Exception for disponer dependent on
donee due to old age or infirmity
Gifts – additional conditions
2. Dwelling home must be owned by the
disponer during the 3 year period
Anti avoidance provision to counter a
discretionary trust or company owning
the house for the 3 years prior to
transfer
Clawback
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•
•
•
•
6 year clawback period
Sale or other disposal of house by donee
Exceptions:
Donee requires long term medical care
Donee was 55 years or more at date of
gift or inheritance
• Proceeds of sale reinvested in another
dwelling house
Clawback of Relief
• House gifted with MV €850k in 2007
• Relief applied under S86 CATCA 2003
• Dwelling sold for €900k in 2011 and
replaced with house costing €700k
• Clawback is €850k-€700 = €150k
Calculating CAT
• Sec 2 CATCA 2003
• Group thresholds
• Each beneficiary has entitlement to a
group threshold
• Threshold amount deducted from taxable
value to arrive at taxable excess
• CAT applied to taxable excess
• T/A determined at date of G/I – not VD
Group Thresholds
•Group A Parent/Child
•Child includes step-child
and adopted child, non
marital child and natural
child who has been adopted
•Child of CP/Minor child of
decd CP and minor child of
CP of deceased child
Group B Close Relations
Group C “Strangers”
Child of the disponer or a
minor child of a predeceased
child of the disponer
Certain foster children but
not considered related to
rest of donor’s family
Lineal ancestor/descendant of
disponer, siblings, children of
siblings
Any other person, remote
relatives, co habiting couples
Indexed Group Thresholds
Dates
From
8/12/2010
1/1/20107/12/2010
8/4/2009 31/12/2009
1/1/20097/4/2009
2008
Group A
€332,084*
Group B Group C
€33,208 €16,604
*€250,000 from 7/12/2012
€414,799
€41,481 €20,740
€434,000
€43,400 €21,700
€542,544
€54,254 €27,127
€521,208
€52,121 €26,060
Calculation
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•
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Aunt to niece 2011
Gift of shares MV €70,000
Transfer expenses
IFV
Small Gift Exemption
Taxable Value
Group B Threshold
Taxable Excess
Gift Tax @ 25%
•
•
•
•
•
•
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•
•
Group B
€70,000
€8,000
€62,000
€3,000
€59,000
€33,208
€25,792
€6,448
Prior Benefits - Aggregation
•
•
•
•
Sch 2 CATCA 2003
Lifetime thresholds
Prior taxable benefits must be aggregated
Only aggregate benefits in the same
group as the current benefit
• For benefits taken on or after 5th
December 2001 - ignore benefits taken
before 5th December 1991
Aggregation of Prior Benefits
Current Benefit Gift from aunt Feb 2011
€70,000
Prior Benefit Inheritance from Uncle Oct 1991
Prior Benefit Gift from grandmother in 1998
€20,000
€25,000
Market Value Current Gift
€70,000
Liabilities Costs and Expenses
€8,000
Incumbrance Free Value
Small Gift Exemption
€62,000
€3,000
Taxable Value
€59,000
Group Threshold €33,208 -Prior taxable benefit €24,365
Taxable Excess
Tax @ 25%
€8,843
€50,157
€12,539
Aggregation Rules
• Sch 2 Para 3 CATCA 2003
• Tax on taxable value of current benefit = Tax
on “Aggregate A” – Tax on “Aggregate B”
• Aggregate A = taxable value of current +
Prior benefits
• Aggregate B = taxable value of prior benefits
• Where no prior benefits, Aggregate B = 0
Example
• 9th July 2011 inheritance from father MV
€400,000
• Previous benefits of
• €70,000 from uncle
• €500,000 from mother
Calculation
Aggregate A Aggregate B
Current Benefit
€400,000
Prior Aggregable Benefits
€500,000
Total
€900,000
Group Threshold
(€332,084)
Taxable
€576,916
€167,916
Tax @ 25%
€141,979
€41,979
Tax on Current Benefit is (A-B) = €100,000
€500,000
(€332,084)
IT 38 Method
• Formula
1. Group Threshold
2. Less taxable value of prior benefits =
3. Unused Threshold
4. Less Taxable Value of Current Benefits =
5. Taxable Excess x 25% =
6. CAT liability
IT 38 Method
Gift from Aunt 2011 €70,000 Costs €8,000
Prior Benefits: Gift €25,000 from Grandmother 1998
Inheritance from Uncle €20,000 1991
1. Group Threshold
€33,208
2. Taxable Value Prior Benefits
(€24,365)
3. Unused Threshold
€8,843
4. Taxable Value Current Benefits
€59,000
5. Taxable Excess
€50,157
6. Tax @25%
€12,539
Rates of Tax
•
•
•
•
•
Current Rate
30%
8/4/2009 – 6/12/2010
20/11/2008-7/4/2009 22%
1999-2008
20%
Earlier Years
Rates up to 40%
Gift tax 75% of
Inheritance Tax
Calculation Issues
• Same Day Benefits
• Limited Interests
• Life Interests
Same Day Benefits
• Beneficiary receiving 2 different benefits
on the same day from 2 different
disponers within the same threshold
• Happens where the date of disposition is
the same in the case of both benefits
• Taxable benefits are apportioned to
ascertain tax on each benefit
• 2 Forms IT 38 should be filed
Example
Mary dies
March 2009
5th May 2011
Jo Inherits
€400k from
Mary
Estate to Mark (LT)
for life
Mark dies 5th May
2011
Leaves €100k to Jo
5th May 2011 Jo
Inherits €100k
from Mark
Remainder to
Jo
2 Benefits on Same Day
•
•
•
•
•
Taxable Values
€500,000
Threshold
€332,084
Taxable Values
€167,916
Inheritance Tax @ 25%
€41,979
Benefit from Mother €41,979*400/500 =
€33,583
• Benefit from Father
€41,979*100/500 =
€8,396
Limited Interest
• An interest for life or for a specified period
of time
• Not an absolute interest
• Right to exclusive use of asset or right to
income from that asset for a period certain
• Schedule 1 Table A or B CATCA 2003
• Factors applied to incumbrance free value
to arrive at taxable value
Life Interests
• Exclusive use of asset or right to income
produced for life
• Use factors in Table A First Schedule
• One column for male and one for female
lives
• Different life expectancies of men and
women
Life Interests
• July 2011 gift of house to mother aged 67
for life with remainder to sister
• MV July 2011 €200,000 with costs €2,000
• IFV
€198,000
• Factor for female aged 67
0.5266
• Taxable Value
€104,267
• Small Gift Exemption
€3,000
• Taxable Value
€101,267
Interest for Period Certain
• Schedule 1 Table B CATCA 2003
• Gift of shares to cousin on 3/5/2011 for a
period of 7 years and 9 months. Value of
shares €250,000. Stamp Duty €2,500
• Group C Threshold applies
Interest for Period Certain
€247,500
IVF
Factor for 8 Years
0.4177
€103,381
Factor for 7 Years
0.3770
€93,308
Difference (1 Year)
€10,073
9 months
€7,555
Taxable Value
€100,863
Private Company Gifts
• Sec 43 CATCA 2003
• Look through private company where gift
or inheritance made to/by private
companies
• Each shareholder deemed to have
made/received benefit in proportion to
his/her entitlement to assets of company
of liquidation
Private Co Example
•
•
•
•
Micro Ltd
Joe 20%; Harry 30% Michael 50%
Joe lends €1m to Micro Ltd interest free
Assume annual benefit is €1m @ 12% =
€120,000
• Gifts are Joe €24k; Harry €36k; Michael €60k
• Joe’s gift is exempt; Group C applies to others
• CAT is Harry €3,065 and Michael €9,065
Private Companies
• Where company is owned by other
company(ies) – look through chain to
reach ultimate beneficial owners
• Sec 27 CATCA 2003 definition of private
companies
• Unquoted company under control of 5 or
fewer persons
• Company law restrictions on making gifts
Discretionary Trusts
Bare/Simple
Trust
Fixed Trust
Trustee hold benefit as nominee
Beneficiary has absolute entitlement
to assets
Transfers to trust taxed immediately
to CAT
Often used for minor children
Beneficiaries have entitlement to trust
income or property
Life and limited interests
CAT due on limited interests Sch 1
Tables
Discretionary Trusts
•Sec 2 CATCA definition
•Property held on trust to accumulate
income/property
•Trustees have discretion to appoint assets to
beneficiaries
•Beneficiaries do not have an interest in possession
•CAT definition for DT wider than legal one
•Inter Vivo Settlements and Will Trusts
•No CAT when assets settled on trust
•CAT charge on appointment to beneficiaries
Discretionary Trust Tax
• Sections 14-25 CATCA 2003
• Levied on trust fund value – income and
capital
• Initial rate 6%
• Annual rate 1%
• Refund of initial levy if trust wound up
within 5 years of charge
6% Initial DT Charge
• Sec 15 CATCA 2003
• DT deemed to have taken an inheritance
• 6% charge on value of trust property on
later of following dates:
• When property becomes subject to DT
• When settlor is deceased
• When no principal object is under 21
years
6% Initial DT Charge
• “Subject to Discretionary Trust”
• Jeannie Hammett Irvine decd case
• Establishing date when residue of estate
becomes subject to a DT
• HC held that residue does not become
subject to CT until residue ascertained and
relevant assets pass to trustees
• Sec 18(3) CATCA - “Will trust relevant
inheritance”
Property Subject to DT
DT settled during
settlor’s lifetime
Period commences on the
date of death of the
• Point 1
disponer
Point 2settlement
Life• Interest
Period commences on the
becoming
• PointDT
3 on death of date of death of the life
LT
tenant
• Point 4
Will Trust Relevant
When property becomes
• Point 5
Inheritance
subject to DT
For residuary estate – the
• Point 6
date the residuary is
ascertained
Principal Object
• The spouse of settlor
• Children of the settlor
• Children of a predeceased child of the
settlor
• Note grandchildren excluded unless
parent has died
Principal Object
• Shares transferred during settlor’s lifetime
into a CT for benefit of wife for her life and
his children aged 25 and 30
• No DT tax on creation of trust as settlor
still alive
• Wife has interest in possession
• Property is not subject to DT even though
all principal objects are over 21
Principal Object
• Wife dies one year later
• No DT tax as settlor still alive
• One of the settler’s children dies leaving a
child aged 8, the Settlor subsequently
dies
• No DT tax as a grandchild becomes a
principal object of trust and is under 21
1% DT Levy
•
•
•
•
Sec 20 CATCA 2003
Annual Levy 1% each 31st December
Deemed inheritance
Cannot be a 1% charge in same 12 month
period as 6%
• Sec 24 CATCA 2003 allows valuations of
houses, land and unquoted shares to be
used for 3 consecutive years – Revenue
agreement needed
Exemptions from DT Tax
• Sec 17 CATCA 2003
• Discretionary Trust set up exclusively for
charitable purposes
• Discretionary Trust set up exclusively for
an incapacitated person or persons
Discretionary Trusts
• Sec 5(1) and 10(1) CATCA 2003
• Charge to CAT arises when a beneficiary
has a beneficial entitlement in possession
• CAT on objects of DT when appointment
from trust made
• Objects have no guarantee that such an
appointment will ever be made
• Disponer is the settlor unless funds
provided by another person
Discretionary Trusts
• April 2011 - Estate left by aunt on DT for
benefit of 2 nieces
• Jun 2011 appointment by trustees €100k
to one niece
• November 2011 trustees wind up trust
and appoint all assets to two nieces 50%
each
• CAT implications?
Discretionary Trusts
• April 2011- 6% Discretionary Trust Charge
• June 2011 – CAT on €100k due by nephew
• Refund or 6% levy as trust wound up within
5 years
• November 2011 –niece and nephew are
liable to CAT on 50% share of trust fund –
including refund of 6% levy
• Inheritance tax applies as DT on death of
settlor
Administration of CAT
•
•
•
•
Sec 45 CATCA 2003
Accountable persons
Beneficiaries are primarily accountable
FA 2010 removed agent or manager who
had care of an asset/income from having
secondary accountability
Accountable Persons
• Secondary Accountability and non
resident beneficiaries
• Irish personal rep is deemed agent of non
resident beneficiary
• Secondarily accountable
• Has right to retain funds for tax from
benefit
• Liability restricted to amount of funds for
distribution to beneficiary
Accountable Persons
• Where there is no Irish personal rep
• Personal rep must appoint a solicitor in
the State as agent
• Appointment must be made prior to
applying for Grant of Probate/Letters of
administration
• Applies where non resident beneficiary is
entitled to benefit > €20,000
Payment and Filing
•
•
•
•
Sec 46 CATCA 2003
Significant changes in FA 2010
ROS filing mandatory unless no reliefs apply
Interest for late payment
Valuation Date 1st
January – 31st August
31st October in same
year
Valuation Date 1st
September – 31st
December
31st October in following
year
Interest on late payment of CAT
•
•
•
•
•
Section 51 CATCA 2003
Interest @ 0.219% per day from due date
Revenue may mitigate interest
Up to 100% of tax
Revenue Guide to DIRT investigation
2008
Payment of Tax by Instalments
• Applies to property other than an absolute
interest in personal property
• Personal property is any property that is
not real property
• Moveable and not attached to land
• Includes leasehold property
• An expensive option – interest accrues
daily
Payment of Tax by Instalments
• Sec 54 CATCA 2003
• Cannot exceed 5 equal yearly instalments
• First instalment due 31st October after
valuation date
• Interest due on same date as instalments
• 75% of interest rate applies to agricultural
and business property
• All outstanding tax due if property sold
Late Filing Surcharge
• Sec 53A CATCA 2003
• 5% (max €12,695) if filed within 2 months
• 10% (max €63,485) if filed > 2 months
late
• S 53A CATCA 2003 – delivery of
fraudulent or negligent return = failure to
deliver
• Errors should be corrected without un
reasonable delay
Surcharge for Undervaluation
• Undervaluation which gives rise to
underpayment of tax under S 53
• Revenue can impose surcharge
• Right to appeal within 30 days
• Form CA 21/CA6 to Valuation Office
• Right to appeal real property valuations to
Land Values Reference Committee
Surcharge for Undervaluation
Estimate of MV of Asset in the Return,
as % of the Value of Asset by Revenue
≥ 0% < 40%
30%
≥ 40% < 50%
20%
≥ 50% < 67%
10%
Penalties and Estates
• Sec 1060 TCA 1997
• Revenue could issue proceedings against
deceased persons’ personal reps for tax
penalties owed by deceased
• Contravention of EU Convention on
Human Rights signed by Ireland in 2004
• Article 6 regard tax penalties as criminal
• Criminal sanction cannot be imposed on
decd
Penalties and Estates
• Bendenoun v France
• AP, MP and TP v Switzerland
• Beneficiaries of a deceased person cannot
be punished for actions of deceased
• S 1077D TCA amended
• Penalties only recoverable where agreed pre
death by decd or his agent with Revenue
• Revenue agreed specified sum under
S1086(2)(c) or (d) TCA 97 (E Brief 15/2008)
Tax as Charge on Property
• Pre FA 2010
• CAT was a charge on property for 12
years from date of gift/inheritance unless
Certificate of Discharge issued by
Revenue
• Cert of Discharge required by purchaser
of property subject of gift/inheritance
• No Certs of Discharge since 14th June
2010
Stamp Duty Introduction
•
•
•
•
•
•
•
Tax > 300 years old
Largely a self enforcing tax
Easy and inexpensive for Revenue
Finance Act 1991
Change from Voluntary to Mandatory tax
Onus shifted to taxpayer
Finance Act 1994 – Appeals procedures
into line with other taxes
Stamp Duty Introduction
•
•
•
•
•
Stamp Duty Act 1891
Stamp Duties Management Act 1891
Finance Acts to FA 1999
SDCA 1999
Professional advisors professional duty of
care to Revenue
• FAs 2001 to 2010
• Role of Case Law – heavy reliance on UK
Stamp duty
Category 1 •Duties payable on range of
Instruments
•Property and commercial transactions
•Duties denoted by holographic stamps
impressed on the document
Category 2 •Duties and Levies payable
•Banks and Insurance companies
•Duties on credit, debit and cash cards
and cheques
•Insurance premiums
•Certain statements of interest
Stamp Duty
• Stamp Duty is a tax on Instruments
• SD is not a tax on transactions
• Law largely dictates requirement for
written document
• Where there is no instrument to stamp
there can be no charge to Stamp Duty
Stamp Duty
• Statute of Frauds 1695 – a transaction in
relation to the sale of land is required to
be in writing to be effective
• Stock Transfer Act 1963 – Stock Transfer
Form is the form of transfer of shares in
Irish private companies
Documents not correctly Stamped
• Cannot be used in evidence in Court, other
than criminal proceedings or Revenue
proceedings to recover SD
• Registration of property ownership in Land
Registry/Registry of Deeds
• Chain of title for sale of house
• Registration as shareholder by Co Sec
Charge to Stamp Duty
• Sec1 SDCA 1999 – definitions and
categories of documents
• Sec 2 SDCA 1999 – Principal charging
section
• Sec 2 must be read in conjunction with
Schedule 1
• Heads of Charge = categories of
instruments falling within charge to SD
• Rate of SD depends on Head of Charge
Heads of Charge
•
•
•
•
•
•
•
S 2 SDCA 1999 – territoriality rules
Schedule 1 – specifies instruments
Sch 1 SDCA – 27 categories of instrument
Listed alphabetically under “HEADING”
8 categories specify rate of SD
Known as “Heads of Charge”
All other categories fall within these 8
Heads of Charge
• Effect of Instrument determines Head of
Charge it falls under
• Substance and not form of transaction
• Cohen v Moore – agreement held to be
liable to duty as a declaration of trust even
though it purported to be a deed
appointing new trustees
Conveyance
• Conveyance – transfer of legal title to an
asset
• Conveyance on Sale Head of Charge
• 13 of 27 categories of instrument listed in
Sch 1 SDCA 1999
• Any document that conveys property on
sale comes within this Head of Charge
Heads of Charge
• Instrument comprising >1 transaction
• May be chargeable under > one Head of
Charge
• Where only 1 transaction and document
could fall into>1 Head of Charge,
Revenue seek to charge higher amount of
duty
8 Operative Heads of Charge
1. Bills of Exchange
2. Conveyance or transfer on sale of any
stocks or marketable securities
3. Conveyance or transfer on sale of a
policy of insurance
4. Conveyance or transfer on sale of any
property, other than stocks or
marketable securities or a policy of life
insurance
8 Operative Heads of Charge
5. Duplicate or counterpoint of any
instrument chargeable with any duty
6. Lease
7. Policy of insurance other than life
insurance where the risk to which the
policy related is located in the State
8. Share warrant
1. Bills of Exchange
•
•
•
•
A draft, order of cheque
Drawn on account in the State
Rate of Stamp Duty is €0.50
Exemptions for direct debits and standing
orders
• Bank issuing cheque book with 15
cheques liable to SD €7.50 – usually
debited to customer’s bank account
2. Conveyance or transfer on sale
...of any stocks or marketable securities
• Liable to SD @ 1%
• Sec 1 SDCA 1999 “Stock” is very widely
defined - includes private shares
• Debt and equity securities included as
marketable securities
• FA (No2) 2008 relief from SD where
consideration < €1,000
Example
•
•
•
•
•
•
Sale of 100,000 shares in B Ltd by A to C
Shares valued at €13 each
Stamp Duty is
100,000 x €13 = €1,300,000
€1,300,000 x 1% = €13,000
Stamp Duty payable by C within 30 days
of execution of Stock Transfer Form
3. Conveyance or transfer on sale
• of a policy or insurance or a policy of life
insurance where the risk to which the
policy relates is located in the State
• Ad valorem duty of 0.1% is due
4. Conveyance or transfer on sale
• on sale of any property, other than stocks
or marketable securities or a policy of
insurance or a policy of life insurance
• This head covers real property
• Ad valorem duty at rates from 0% to 6%
• Rate depends on type and value of
property and use or ownership of property
• Different rates for residential and
commercial property
4. Conveyance or transfer on sale
• on sale of any property, other than stocks
or marketable securities or a policy of
insurance or a policy of life insurance
• This head covers real property
• Ad valorem duty at rates from 0% to 6%
• Rate depends on type and value of
property and use or ownership of property
• Different rates depending on type and use
of property
5. Duplicate or Counterpart …
• of any instrument chargeable with any
duty
• Liable to same duty as original where duty
on original did not amount to €12.50
• Liable to €12.50 in all other cases
• Landlord’s copy of lease (counterpart)
stampable at 12.50
6. Lease
• Instruments liable to duty on rents @1%,
6% or 12% depending on length of lease
• Liable to ad valorem duty on any premium
at rates between 0% and 6% depending
on type, use and ownership of leased
property
• Exemptions for leases of residential
property where lease < 35 years and
annual rent < €30,000
7. Policy of insurance….
• other than life insurance where the risk to
which the policy relates is located in the
State
• Where 1 premium only and amount ≥ €20
or
• Where there is > 1 premium and total
amount payable in 12 mth period ≥ €20
• Stamp Duty is €1
8. Share Warrant
• Share certificate is an instrument under
seal of the co certifying that holder is
entitled to shares detailed in certificate
• Share certificate details are absolute and
non -negotiable
8. Share Warrant
• Share Warrant to bearer is a certificate
under seal of the company
• Person in possession of the share warrant
is entitled to shares specified in the
certificate
• No of shares can be varied or negotiated
• Shares can be transferred by delivery of
warrant
8. Share Warrant
• Head of Charge applies to
• Share warrant issued under Sec 88 CA
1963
• Stock certificates to bearer and any
instrument to bearer
• By company or body of persons formed in
the State expressed in currency of the
State
• Stamp Duty is 3% of nominal value
Territoriality
• Document or Instrument determines scope of
charge to Stamp Duty
• Sec 2 SDCA 1999 charging provisions
– Instrument within Heads of Charge Sch 1
– Instrument executed in the State
– Relates to property in the State, wherever
executed
– Relates to a matter or thing to be done in the State
• Residency of vendor or purchaser does not
impact the scope of SD charge
Execution
• Document executed in the State
• Location of property is irrelevant
• Sealed document – signed sealed and
delivered
• Unsealed document – signed only
• Seal =mark attached to document to
authenticate it
• Seal fixed before execution
• Delivery effected by physical hand over
Execution
• Company seal required by law
• Categories:
1. Conveyance of property
2. Issuing of share certificates or
warrants
3. Granting a power of attorney
Execution
• Wright v IRC (1855) – conveyance of
lands executed in England held liable to
UK SD even though document related to
transfer of lands in Australia
• Documents relating to non Irish property
where no exemption or relief in Ireland –
execute outside Ireland to avoid
inadvertent charge to Irish SD
Foreign Property Exemptions
• Sec 88 and 98 SDCA 1999
• Conveyance, transfer, lease or licence of
any immovable property situate outside
the State
• Unless relating to Irish immovable
property or stocks of a company with
register in the State
Example
•
•
•
•
•
Belgian company
Shares worth €3m with small Irish portion
Irish production facility worth €100k
Sale of shares – Irish SD?
Revenue likely to accept that only Irish
relevant portion liable to SD
• Irish SD €100k @ 1%
Situs Rules for Property
Real Property
Location of Property
Moveable Property
Location at time of Execution
Ordinary Contract Debt
Location of Debtor
Shares
Where share register kept
Insurance Policy
Where risk is located
Insce on Immoveable Prop
Where property located
Bill of Exchange
Where physically located
Goodwill
Where business carried on
Option
Where underlying prop located
Registered Intellectual Prop
Place of Registration
Done in the State
• “Relates to matter or thing to be done in
the State”
• Very wide interpretation – almost any
transaction
• IRC v Maple & Co 1908 – Land situated in
France transferred by deed executed in
France
• Consideration was issue of shares in UK
company – UK SD applied to document
Done in the State
•
•
•
•
Faber v IRC 1936
Employment contract of engineer
Employer Canadian company
Covenant executed in Canada in
consideration for shares in Canadian co
• Amount payable related to proportion of
engineer’s employment earnings
• Duties carried out in UK. Held UK SD
applied
Revenue Notes for Guidance
• Instrument and/or underlying transaction
should relate to or involve a substantive
action or obligation to be carried out or
undertaken in the State
• Foreign property where only connection with
Ireland is residence of one party is not liable
to Irish SD
• Active participation needed – issue of shares
in Irish company
Administration of Stamp Duty
• Sec 137 SDCA 1999
• Revenue Commissioners responsible for
enforcement
• Statutory powers
• Statements of Practice
• Sec 2(3) SDCA SD Return and payment due
within 30 days of execution of Instrument
• Revenue practice – 44 days allowed
Adjudication/Escrow
• SD Return must be filed within 30 days
where adjudication needed
• SD payable within 14 days of issue of
Notice of Assessment
• Certificate of Escrow must be lodged with
Revenue with details of dates and reason
• Date of execution = date condition fulfilled
and document released from escrow
Filing of SD Returns
• Return is a statutory requirement
• e-Stamping mandatory from 1st June 2011
• No stamping in absence of properly
completed return
• Revenue issues stamp certificate which
replaces hologram stamp up to
31/12/2009
• Print electronic version from ROS
• Unique id for security and validation
Filing of SD Returns
• Self assessment system
• Instrument only presented to Revenue in
adjudication cases
• SD Return contains all relevant
information
• Accountable person and in certain
circumstances professional advisor may
be liable to penalties and underpaid tax
Adjudication
• Sec 20 SDCA 1999
• Instrument presented to Revenue for
formal assessment of amount due
• Adjudication is mandatory in certain cases
• Option to have an instrument adjudicated
under Sec 20(1) SDCA 1999
Mandatory Adjudication
Sec 30(3)
SDCA
Sec 30(4)
SDCA
Sec 33(3)
SDCA
Sec 46(6)
SDCA
Sec 54(2)
SDCA
Sec 79
SDCA
Conveyances or Transfers inter vivos
which operating as a voluntary disposition
Conveyances in consideration of marriage
Conveyances or transfers in contemplation of
a sale
Conveyances to sub purchasers within sec
46(4)
Leases deemed to operate as voluntary
dispositions inter vivos
Transfers of property between associated
companies
Mandatory Adjudication
Sec 80 SDCA
Transfers of property in connection with
Reconstruction /Amalgamations of cos
Sec 80A SDCA
Demutualisation of Assurance Companies
Sec 81 SDCA
Conveyances or transfers of property to
young trained farmers
Sec 81B SDCA Conveyances or transfers of property
availing of Farm Consolidation Relief
Sec 82(1) SDCA Conveyances or transfers or leases of land
to approved charities
Sec 82B SDCA Conveyances or transfers or leases of land
to approved sports bodies
Mandatory Adjudication
Sec 82A SDCA
Sec 83A SDCA
Sec 83B SDCA
Instrument transferring designated
securities which are part of a donation
to approved bodies
Transfer of site to a child
Sec 95 SDCA
Sec 103 SDCA
Conveyances or transfers of land in family
arrangements
Woodlands relief
Shared ownership leases
Sch 1 Para 15
Consanguinity Relief
Sec 20 SDCA
Where Revenue Commissioners require
Expression of Doubt
• Expression of doubt can be made on SD
Return
• Revenue exam factors
• 44 day time limit still applies to non
adjudication cases
• If disagreement, case treated as adjudication
case
• Genuine expression of doubt – no penalties
or interest if SD Return filed and paid on time
Lost Deeds
• Accidental loss up to Dec 2009
• Sec 155 SDCA – Revenue issue new
stamps
• Statutory declaration may be needed
• Stamp Duty Certificate replacement
• e-Stamping system – reprint lost
certificate
Accountable Persons
• Table of Accountable Persons Sec 1
SDCA
• SD unpaid attaches to accountable
persons – jointly and severally liable
• Voluntary dispositions - all parties are APs
• Personal Reps are APS for deceased
person
CREST System
• Electronic share dealing system
• Irish and UK stock exchanges
• Removes requirement for written
document to transfer shares
• Sec 69 SDCA charges transfers to SD
• Operator instruction deemed to be
instrument
• Transferee is AP under Sec 71(a) SDCA
Table of Accountable Persons
1
Bond, Covenant or other
Instrument
Obligee, Covenantor or
other person taking the
benefit
2
Conveyance or transfer on sale of
any stock or marketable securities
Purchaser or transferee
3
Conveyance or transfer on sale of
any property other than stock or
marketable securities
Purchaser or transferee
4
Lease
Lessee
5
Mortgage, Bond, Debenture or
Covenant (exc Mkt Sec) and
Warrant of Attorney to confess and
enter up judgement
Mortgagee, Obligee or
transferee
Table of Accountable Persons
6
Settlement
Settlor
7
Duplicate or counterpoint of
any instrument
Any of persons specified in
this column as appropriate
8
Voluntary dispositions or
Parties to the instrument
instrument deemed to operate
as such
9
Parties to the instrument
Any other instrument not set
out above
10 CREST share transfers
Transferee
Penalties and Interest
• Sec 14 SDCA 1999
• Interest and penalties for late or unpaid duty
• Interest and penalties must be paid before
Stamp Certificate issued
• Adjudication cases – file within 30 days of
execution – pay assessed duty within 14
days of assessment
• Other cases – pay and file within 44 days of
execution
Penalties and Interest
• Interest runs from date of execution of the
Instrument
• Interest charged on lower of tax due or
amount of underpaid tax
• Sec 14(2) SDCA imposes a further penalty
on:
• Any instrument referred to in table of APs
• Any instrument operating as voluntary
conveyance
Penalties and Interest
Stamped > 30 days < 6 mths
10% unpaid duty
Stamped > 6 mths< 12 mths
20% unpaid duty
Stamped > 12 mths
30% unpaid duty
Instrument executed 5th April 2011
Duty is €1,800
Submitted for Stamping on 3rd August 2010
Penalties
120 days interest = 120*0.0219% = €47
Surcharge 10%
€180
Total Penalties
€227
Charge and Calculation of SD
• Charge to SD depends on category of
document and Head of Charge
• Conveyance of sale Head of Charge rates
depend on nature of property
• 2 categories of property
• Non residential property
• Residential property
Non Residential Property
• Property other than residential property,
stocks or market securities, policies of
insurance or life insurance
• Includes land and buildings that are not
residential property
• Ad Valorem duty applies – rate depends
on amount or value of consideration
passing
Non Residential Property
≤ €10,000
Exempt
€10,001 - €20,000
1%
€20,001 - €30,000
2%
€30,001 - €40,000
3%
€40,001 - €70,000
4%
€70,001 - €80,000
5%
> €80,000
6%
Mixed Property
• Sec 45(2) and 52(5) SDCA 1999
• Sales and leases of mixed property
• Estimate of apportionment of consideration
needed
• Charge each apportioned part to SD rates
• Sec 16 SDCA – penalties for undervaluation
• 50% if difference 10%-30%
• 100% if difference >30%
Larger/Series of Transactions
• Sch 1 SDCA 1999 – artificial splitting of
transactions to avail of lower rates
• Transactions aggregated for SD rate
• Revenue will look for
– Same purchaser/vendor under each
instrument
– Same property being transferred
– Timing of transactions
Residential Property
• Section 1 SDCA 1999
• Building or part of building used or
suitable for use as a dwelling at date of
execution of conveyance or lease
• Includes partially constructed/adapted
dwellings
• Dwellings not adapted for non residential
use eg derelict houses
Residential Property
• Curtilage included – ancillary buildings,
structures, outhouses, yard, garage,
driveway, garden
• Parking space acquired with dwelling in
sole use of owner
• Gardens up to 1 acre included
• Lands > 1 acre is non residential –
apportionment needed
Residential Property
• Major reform of SD Rates in FA 2011
• Rates for instruments executed on or after
8th December 2010
Up to €1,000,000
1%
Balance
2%
Residential Property
• Transitional Arrangements
• Instruments executed on or after
8/12/2010 and before 1/7/2011
• Where new reduced SD rate > older rate
due to abolition of relief or exemption
• Older rate applies
Transaction Certificates
• Inserted into instrument deed where rate of
SD is lower than top rate
• Mixed use property
• Residential property
• Paragraph added to deed/Revenue Leaflet
SD 10a
• Top rate applies if no TC
Stocks and Securities
•
•
•
•
Sale of company
Sale of business assets
Sale of shares in company
Consideration may be discharged by way
of marketable security
• Rate of SD 1% on value of stock or
security
• Ad valorem rates up to 6% charged on
business assets
Marketable Securities
• Sec 1 SDCA 1999 – any security that can
be sold on the stock market in the State
• Includes shares, loan stock or
government funds, foreign or Irish
• SD payable on value of stock on date of
transfer – not nominal value
• Share purchase agreement
• Stock Transfer Form
Marketable Securities
• Buyer’s title not complete until STF
executed and buyer’s name entered on
register of members
• Sec 81 CA 1963 – prohibits registration of
transfer of shares without proper
Instrument of transfer
• Oral share transfers not valid
Share Purchase
• Co A shares
purchased by X
• Value €3m
• Share Purchase
Agreement executed
3/4/2011
• Due diligence for 6
weeks
• Share Transfer Form
executed 6/6/2011
• No SD on execution
of Share Purchase
Agreement
• Relevant date for SD
Discharge of Debt
• Sec 41 SDCA 1999
• Where the discharge or transfer of
existing debt = consideration for transfer
or conveyance on sale
• Ad Valorem Duty applies
• Agreement to purchase business for
€100k plus discharge of debt of €20k
• SD on €120k
Discharge of Debt
• Finance Act 2010
• Anti avoidance measures
• Arrangements to discharge debts of
company or connected company where
share purchase
• Injection of funds post purchase can be
treated as additional consideration for SD
• Wide ranging – effect on normal
commercial transactions?
Voluntary Disposition
• No consideration passes or consideration
is less than value of asset
• Includes a gift
• No connected party rules for SD
• Sec 30 SDCA 1999 imposes MV on all
transfers at undervalue
• Applies where no or inadequate
consideration
Voluntary Disposition
• Transfer of property subject to mortgage
• Calculate equity of redemption
• SD on higher of mortgage or equity of
redemption
• Property gifted MV €500k ; Mortgage €350k
• Stamp Duty on €350k under Revenue
practice
Unascertainable Consideration
• Sec 44 SDCA 1999
• No consideration expressly stated in
agreement
• SD levied on market value of property
• Earn out clause in share purchase
agreement
• Care needed with such cases – agree
values with Revenue?
Valuations
• Sec 26 CATCA 2003 provisions applied
to value property
• Sec 26(2) CATCA 2003 – price on open
market subject to conditions to obtain best
price for vendor
• Revenue exercise powers of valuation in
four main situations
Valuations
1. Sec 44 and 55 SDCA – unascertainable
consideration
2. Sec 30 and 54 SDCA – voluntary
dispositions inter vivos
3. Sec 40 SDCA – consideration consists
of stocks or marketable securities
4. Sec 33 and 34 SDCA – certain
conveyances or transfers, or certain
agreements in contemplation of sale
Valuations
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Voluntary dispositions and Valuations
Sec 18(a)-(c) SDCA – value to be
determined without regard to:
– Any power to revest with disponer
– Any annuity or interest reserved
subject to forfeiture
– Any right of residence, support,
maintenance (10% allowed for
transferor)
Valuations - Shares
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Complex to value shares
Nature of business determines method
Form SD4 – private companies
Earnings Basis
Assets Basis
Dividend Yield
Hybrid
Other method
Valuations - Shares
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Use professional valuation
Revenue – Work Manual & Practices
Discounts allowed
>75%
>50%
50%
>25%
≤ 25%
0-5% discount
10-15% discount
20-30% discount
35-40% discount
Dividend valuation/earnings
basis 50-70%
Surcharge for Undervaluation
• Voluntary Dispositions
• Sec 15 SDCA 1999
• Applies to voluntary dispositions and
voluntary leases under S 30 and S 54
SDCA
• Instruments must be submitted to
Revenue for adjudication with valuation
• If no disclosure – Revenue can use
consideration as understatement
Surcharge for Undervaluation
% by which MV
understated
>15% < 30%
Surcharge
>30% < 50%
50%
> 50%
100%
25%
Transfers between Relatives
• Consanguinity Relief
• Applies to conveyance or transfer of
property other than shares
• No longer applies to residential property
• First Schedule SDCA 1999
• SD reduced to 50% of rate applicable
• Transaction Certificate needed
• Claim must be submitted for adjudication
Who are “Relatives”?
• Person acquiring property must bear one of the
following relationships to transferor
– Lineal descendant
– Step-Brother/Sister
– Step-Child
– Adopter foster child
– Parent/Grandparent
– Brother/Sister
– Nephew/Niece
Married Persons/Civil Partners
• Section 96(1) SDCA 1999
• Exemption from Stamp Duty on all transfers
of property
• No adjudication needed for Instrument of
transfer
• Sec 97(1) SDCA – transfer exempt where
former:
– Spouses have obtained divorce
– Civil Partners under decree of dissolution
– Cohabitants under Court Order
Property Transactions
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Residential Property
Conveyance on sale Head of Charge
Includes assignment of lease
New regime FA 2011
New Schedule of Stamp Duty Rates
Substantial reduction in rates
Transitional arrangements
Rates Pre FA 2011
Residential Property
Date Instrument Consideration
executed
5th November
2007 to 7th
December 2010
Rate
< €127,000
Exempt
First €125,000
0%
Next €875,000
7%
> €1,000,000
9%
Residential Property Reliefs Pre FA 2011
Legislation
Exemption/Relief
Sec 91A SDCA 1999
Owner occupier new house
exemption < 125 sq metres
Owner occupier new house
exemption > 125 sq metres
First time purchaser exemption
Sec 92 SDCA 1999
Sec 92B SDCA 1999
Sec 83A SDCA 1999
First Schedule SDCA
1999
Site from parent to child value <
€500k for dwelling house
Consanguinity Relief
Connected Contracts
• Sec 29 SDCA – anti avoidance for
residential properties
• SD cannot be avoided by entering into
two contracts instead of one
• Consideration under two contracts (site
and construction) aggregated
• Applies where construction contract
connected to sale of land
Connected Contracts – Comm Prop
• Site and construction purchase contracts
• Is building substantially complete at time
of contract?
• Cost of building work completed >75%
total cost of building work agreed?  YES
• Site architects/engineers certificates
• Are contracts interlocked? SOP SD/2/90
• Contracts dependent or conditional on
each other
Connected Contracts
Contract Not Interlocked
Building IS substantially
completed
Contract Not Interlocked
Building NOT substantially
completed
Contracts Interlocked
SD on MV of Site
and total
construction
costs
SD on MV site and
cost of works done
Full consideration
paid for site and
construction
Professional & Ethical Skills - CAT
• Dealing with major life event of client
• Building a rapport – good communication
skills needed
• Listen to client – explain in “plain” language
• Other professional advisors
• New clients – ML checks and ELs
• Research material – CATCA 2003
• RM on conflicts of interest
Professional & Ethical Skills - SD
• SD issues – transfer of real property and
shares
• Dealing with client, legal advisor, bank, other
parties to transaction
• Representing your client at meetings
• Identify additional expertise needed
• Revenue audits of transactions common
• Anti ML checks
• Conflict of interest?
Round Up CAT
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Rights under Succession Act 1965
Spouse/Civil Partner legal rights
Children’s right to apply to Court
Doctrine of Lapse
Round Up CAT
• Territoriality for CAT
• Pre 1999 Rules based on domicile
• Post 1st December 1999 – residence
based charge
• Non domiciled individuals – 5 years
consecutive residence
• Irish property chargeable
Round Up CAT
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Charge to gift and inheritance tax
Beneficially entitled in possession
Date of gift/inheritance
Market Value
Valuation date
Round Up CAT
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Calculation of taxable value
Liabilities, Costs and Expenses
Incumbrance Free Value
Limited Interests
Life Interests and interests for Period
Certain
• Tables for Valuation Factors
• Deduction for Consideration
Round Up CAT
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Exemption from CAT
Small Gift Exemption
Married Couples/Civil Partners
Dwelling House Exemption
Round Up CAT
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Calculation of CAT
Group Thresholds
Prior Benefits
Same Day Benefits
Gifts to/by Private Companies
Round Up CAT
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Discretionary Trusts - definition
6% Initial Charge
1% Annual Charge
Principal Objects
Exemptions from DT
Round Up CAT
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Accountable Persons
Non resident beneficiaries
Payment and Filing
FA 2010 changes
ROS mandatory
Payment by instalments
Estates and penalties on deceased
persons
Round Up SD
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History of SD
Heads of Charge – 8 Operative Heads
Territoriality
Administration
Table of Accountable Persons
Penalties and Interest
Round Up SD
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Charge and calculation
Non Residential Property
Series of transactions
Residential Property
Transaction Certificates
Stocks and Securities
Discharge of debt
Round Up SD
• Voluntary Dispositions
• Unascertainable Consideration
• Valuations – including shares in private
companies
• Revenue powers – valuations
• Surcharge for undervaluation
Round Up SD
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Reliefs
Consanguinity Relief
Married persons
Property Reliefs – pre FA 2011 and
transitional relief
• Connected contracts for property
transactions