Revenue Note for Guidance

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Revenue Note for Guidance

Section 45 Directions as to apportionment of consideration

Summary

This section sets out how the consideration for a sale is to be apportioned in certain circumstances.

Details

(1) Where property purchased by a single purchaser for one consideration is conveyed to that purchaser in separate lots by different instruments that consideration must be apportioned so that each instrument recites its own distinct consideration for the property conveyed by it. Where the property is non-residential the parties may decide on whatever apportionment they think fit. However, if there is a residential element the apportionment must be on a just and reasonable basis (see subsection (2)).

Example

A bought 2 units in a new commercial development for a total consideration of €280,000. Each unit is conveyed by a separate deed to A. The total consideration must be apportioned between the 2 deeds i.e. between the 2 deeds the total of the apportioned considerations must equal €280,000. In this case as each unit was worth the same the parties decided that each deed would recite a consideration of €140,000. The stampable consideration is €140,000 in respect of each conveyance. As the property is non-residential, the rate of duty applicable to each conveyance is 2%.

(2) The consideration must be apportioned on a just and reasonable basis—

  • where a mixed property (e.g. a dentist using part of his or her dwelling as a surgery, farmhouse with the farm), is sold for one consideration, or
  • where the sale of a wholly residential property or a mixed property forms part of a larger transaction or series of transactions - see head of charge in Schedule 1. The aggregate consideration appropriate to the larger transaction or series of transactions must be apportioned as between the residential element and the non-residential element comprised in the larger transaction or series of transactions.

Example 1

A owns 2 houses side by side. He contracts to sell them to B for a total consideration of €360,000. To give effect to the contract a separate deed of conveyance is drawn up in 2008 for each house, each reciting a consideration of €180,000. The apportionment is considered to be just and reasonable because the houses are similar to each other in all material respects (e.g. location, size, fabric of the building).

The stampable consideration in respect of each conveyance is €180,000. Because it is part of a larger transaction the duty applicable to each conveyance is the duty applicable to a consideration of €360,000 which is divided in two and applied to each conveyance. Duty on aggregate consideration of €360,000 = €3,600 (€360,000 @ 1%) × 50% = €1,800 for each conveyance.

Example 2

A owns a pub with living quarters overhead. He also owns the adjoining house. He contracts to sell both premises to B for a total consideration of €600,000. To give effect to the contract separate deeds of conveyance are drawn up in November 2008 - one for the pub and the other for the house. Following a valuation of the pub and the house by an independent valuer the conveyance of the pub recites a consideration of €400,000 (of which €320,000 is for the pub and €80,000 for the living quarters overhead) and the conveyance of the house recites a consideration of €200,000. The stampable consideration and the rate of duty applicable in respect of each conveyance is:

Stampable Consideration

Rate of Duty

conveyance of pub

• non-residential element

€320,000

2%

• residential element

€ 80,000

1%

conveyance of house

€200,000

1%

(3) A number of persons may contract to purchase property for one consideration. It is agreed how the property is to be divided between each purchaser and what each purchaser’s distinct share of the consideration is to be. The vendor then enters into a separate conveyance with each purchaser whereby only the part purchased by a particular purchaser is conveyed to that purchaser. Each conveyance recites the share of the consideration agreed to be paid by the purchaser in question. In such cases each conveyance is chargeable on the consideration recited in each of the conveyances.

Example

A sells her farm of 100 acres to B and C for €200,000. It is agreed between B and C that B will take 30 acres and C will take 70 acres and that each will take a conveyance of his own portion of the lands. Subsequently, 2 conveyances are executed as follows:

  • B takes a conveyance of 30 acres for €65,000, and
  • C takes a conveyance of 70 acres for €135,000.

The stampable consideration in respect of the conveyance to B is €65,000 and in respect of the conveyance to C is €135,000 and stamp duty is chargeable on both conveyances at the rate of 2% as the property is non-residential.

(4) Where several instruments are required to complete the purchaser’s title, only one of these (i.e. the principal instrument of conveyance - see section 47) is liable to the full ad valorem duty. The other instruments are not chargeable to duty as they are not regarded as conveyances or transfers on sale where the ad valorem duty on the entire consideration for the sale has been paid on the principal instrument.

Example

A owns land which is land-locked. To reach the land A has a right of way over B’s land. A sells his land to C. The land is conveyed to C via Instrument D and the right of way is assigned to C via Instrument E. Instrument D is liable to the full ad valorem duty and Instrument E is not chargeable to any duty.

Relevant Date: Finance Act 2014