There have been significant changes to stamp duty in the last number of years with a large reduction in rates. The farming sector has benefitted from this in that the rate of stamp duty on the purchase of agricultural land had effectively fallen from 9% to 2%. With Budget 2018, the rate has now increased to 6%. It would therefore be worthwhile looking at the stamp duty position for the farming sector and to look at it as comprehensively as possible.

What is stamp duty?

Stamp duty is a transactional tax. You pay stamp duty on certain instruments (written documents) that:

  • transfer ownership of property, or
  • are agreements to transfer ownership of property.

    • Property includes land, buildings, business assets (goodwill) and shares, stocks and marketable securities (both quoted and unquoted).

    You also pay stamp duty on certain leases and agreements to lease.

    When is an instrument liable to stamp duty?

    An instrument is liable to stamp duty if you execute (sign, seal or both) it:

  • in Ireland, or
  • outside Ireland, but it relates to property in Ireland or something done or to be done in Ireland.

    • Leasing of farmland

    One of the recommendations at the Agri Taxation Review intended to encourage the more productive use of farmland was that stamp duty relief be given in relation to leases of farmland. This was subject to a commencement order and was never signed in as there was difficulty in collecting the data to show how much the relief would actually cost. The stamp duty relief is a State aid to the agri sector and therefore the cost of it must be collected. The Finance Bill 2018 now allows for the introduction of this relief as it brings in the necessary changes to allow the documentation to be put in place to collect the tax-saving data.

    It will allow, subject to certain conditions, relief for stamp duty on land that is leased on the long-term basis to active farmers. The conditions must be:

  • The term of the lease must be of a period of not less than six years and not more than 35.
  • The land must be used exclusively for farming carried on by the lessee.
  • The land must be farmed on a commercial basis with the view to the realisation of profit, thus confining the relief to genuine farmers.

    • Revenue will accept that the lease may be to an individual, to a partnership or to a company where a named shareholder and the working director, farms the land on behalf of the company. Where the land is leased to one’s own company, the stamp duty relief will still apply. The lessee must either have:

  • An agricultural qualification, or
  • Farm the land for not less than 50% of this normal working time.

    • If conditions not being met, the stamp duty that would have been chargeable upon the grant of the lease falls due together with any interest that would fall due. Legislation on data-sharing between the Revenue Commissioners and the Minister for Agriculture is contained in the Finance Act, which will allow for the abolition of stamp duty on long-term leases. The current rate is 1% of one year’s rent where it is drawn up at market value. Following the passage of the Finance Act, which was passed and signed into law on 25 December, it is expected that the abolition of the stamp duty on long-term leases will come into effect early in 2018. However, a statement of practice from Revenue is awaited on this. There are also a number of other tax implications outside of stamp duty brought in by budget 2018.

    Consanguinity relief now at 1% rate

    Conveyances and transfers of property between close relatives was subject to stamp duty of one half of the normal rate provided the transferor was under 67. However, since Budget 2018, this relief has now been changed in that the relief is at the rate of 1%. This relief is in place up to 31 December 2020.

    There are no age restrictions on either the transferor or the transferee in this period. The rate of 1% applies irrespective of any ages. The relief is subject to the person receiving the transfer either farming the land or leasing it out to an active farmer.

    Young, trained farmer

    It should be noted that the stamp duty exemption for young trained farmers remains in place. A farmer under 35 years of age who has the required agricultural qualification can benefit from a full exemption of stamp duty on farm transfers provided he meets the necessary conditions, the main one being that he/she must farm the land.

    In summary, for family transfers there is a zero percentage rate of stamp duty where the transferee is a young trained farmer and a rate of 1% for all other family transfers which include family/sales/purchases. The only change that has happened is it has now been clarified that to qualify for the stamp duty exemption for young trained farmers relief, a business plan must be furnished to Teagasc. This is not a new condition and has been in place. It is simply a ‘‘tidying up’’ of the legislation to ensure that stamp duty is fully compliant with EU state aid requirements.

    Farm consolidation relief revised

    The old consolidation relief section, originally brought in in 1999, has been revived. It applies to instruments/transfers/sales/purchases between 1 January 2018 and 31 December 2020. It applies to a sales/purchase within 24 months of each other. This was previously 18 months. It also confirms that a new 1% rate of stamp duty will apply to the excess used to acquire new land over proceeds from the sale of the own land. The main condition is that you must farm the land for five years.

    You will be required to get a consolidation cert from Teagasc as part of the capital gains tax relief but the good thing about this is that it brings certainty of a low rate of stamp duty on farm consolidations. The consolidation relief can also apply to farm buildings and derelict farmhouses.

    Transfer of sites

    A 6% rate of stamp duty on land transfer applies. However, the minister has confirmed that a site of less than an acre intended for one-off housing is treated as non-residential property and, thus, initially the 6% rate applies. However, a stamp duty refund scheme was introduced where it applies and it provides for a partial refund of stamp duty where land is used for housing. In relation to a site used for a single house, the scheme will allow for a refund of two thirds of the stamp duty being paid on the acquisition of the site where the area occupied by the house, including its curtilage, does not exceed one acre.

    Where the site exceeds one acre, the refund will be capped at two-thirds of the amount referable to one acre.

    The main conditions for the availability of the refund are that the purchaser must have paid 6% stamp duty when acquiring the land, construction work must have started within 30 months of the land being purchased and the house must be completed within two years of the commencement of construction.

    Commercial property

    Stamp duty on commercial property, including farmland, increased from 2% to 6% effective from Budget Day, 10 October 2017. However, there are now transitional arrangements put in place. Where purchasers had a binding contract in place before 11 October 2017 and where the transfer was completed before 1 January 2018, the 2% rate of stamp duty will apply to those transactions.