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Taxation
The capital taxes affecting property transactions are Stamp Duty, Capital Gains Tax and Capital Acquisitions Tax.
Stamp Duty
Stamp Duty is a form of taxation payable on certain written instruments. The relevant instruments are detailed in the first schedule to the Stamp Act 1891. Generally speaking, a charge to stamp duty will arise on a written instrument, where the instrument was required to complete the transaction. A written instrument is required to transfer land, buildings, shares and stamp duty is payable on these transactions. Legally, a written agreement is not required to transfer ownership of a car, therefore there is no stamp duty payable on this type of transaction, involving wasting chattels.
The rate of stamp duty payable will depend on the type of instrument and the consideration or price.
Transfer of Agricultural Lands or Commercial Property
| Amount Exceeding | Not Exceeding | Rate of Duty |
| £0 | £5,000 | Not liable |
| £5,000 | £10,000 | 1% |
| £10,000 | £15,000 | 2% |
| £15,000 | £25,000 | 3% |
| £25,000 | £50,000 | 4% |
| £50,000 | £60,000 | 5% |
| £60,000 | 6% |
Residential Property - rates of stamp duty
| Price | First time buyer | Owner occupier | Investor new house | Investor 2nd hand |
| Under £100,000 | Exempt | Exempt | 3% | 9% |
| £100,000 - £150,000 | Exempt | 3% | 3% | 9% |
| £150,001 - £200,000 | 3% | 4% | 4% | 9% |
| £200,001 - £250,000 | 3.75% | 5% | 5% | 9% |
| £250,001 - £300,000 | 4.5% | 6% | 6% | 9% |
| £300,001 - £500,000 | 7.5% | 7.5% | 7.5% | 9% |
| Over £500,000 | 9% | 9% | 9% | 9% |
Note re New Houses
Where an owner occupier is buying a new house, a slightly different calculation is made in relation to the house. A rough guide is to take the overall cost of the house, divide it by four and this is the price to be taken into account for stamp duty purposes, e.g.: New house price £270,000. Divide this by 4 and it gives you a new value for stamp duty purposes of £67,500. As this falls into the category of under £100,000, the purchase is exempt from stamp duty. In effect, this means that a new house would have to be in excess of £400,000 for an owner occupier or £600,000 in respect of a first time buyer.
Stamp duty on mortgages has been abolished since the budget of December 2000.
Transfer of Stocks
and Shares
The rate is
1%.
Leases
The stamp duty payable on the annual rent is as follows:
1% where the term
is less than 35 years
6% where the term is more than 35 years, less than 100 years
12% where the term is more than 100 years
Where annual rent on a private residential dwelling house does not exceed £6,000 per annum no duty shall become payable.
Capital Gains Tax
This is a tax payable on the gains made on the disposal of chargeable assets. The tax is payable on the difference between the cost or value of the asset at the time it was acquired and the price or value of the asset on disposal. Allowances are made for capital expenses and acquisition costs. There is also a provision for indexation, which is an adjustment made for inflation based on the consumer price index. Tax is charged at a rate of 20% on the chargeable gain.
There are reliefs available for the transfer of a business whereby any sale proceeds on the disposal of a business asset can be reinvested into similar or like assets, and the capital gain, if any, is deferred or postponed until such time as these new assets cease to be used by the person in the trade. This is subject to meeting the strict guidelines and time limits set down by the Revenue Commissioners.
There is no capital gains tax payable on the disposal of your principal place of residence, provided the owner has occupied the dwelling during his/her period of ownership.
Capital Acquisitions Tax
The tax is paid on gifts taken during a donor's life and on the inheritances taken after the disponer's death.
There are tax free threshold amounts which vary depending on the relationship between the donee (or successor) and the donor (or disponer). Tax is paid at a rates of 20% of the value of the property received by the donee (or beneficiary) over the threshold amount. The present threshold amounts are :
| Donor/Disponer | Threshold |
| Spouse: | Exempt |
| Parent: | £316,800 |
| Brother, sister, uncle, aunt, child, grandparent, etc: | £31,680 |
| Other: | £15,840 |
There are reliefs available to the transfer of business and farming assets. The relief, known as "Business Relief" was introduced in the Finance Act 1994 and the provisions have been altered by each of the subsequent Finance Acts.
Under the relief the value of "Relevant Business Property" is reduced by 90% for gift and inheritance tax purposes provided certain conditions are met.
To qualify the business must be carried on in the state and must be carried on for profit or gain. The Relevant Business Property must be owned by the donor for a period of five years in the case of a gift and by the disponer for two years in the case of an inheritance.
What is Relevant Business Property?
1. Unquoted shares in a company: There are requirements for shares to qualify in that the donee/beneficiary must own at least 25% of the voting rights of the company and he must have worked with the company as a full time employee of the company for a period of five years prior to the benefit.
2. Land, building, plant and machinery situated in the state used wholly or mainly in a business carried on by the donor/disponer.
Business which do not qualify are:
a) those carried on wholly or mainly outside the state,
b) those consisting wholly or mainly in dealing in currencies, securities, stocks or shares, land and buildings,
c) consists wholly or mainly of making or holding investments.
Agricultural Relief also allows for the value of the gifted or inherited asset to be reduced by 90%, provide certain conditions are met. Basically, the person receiving the gift (the "donee") is the key person in relation to the relief. If 80% of the value of the combined assets of the donee (ie: his existing assets together with the gift/inheritance) comprise of agricultural property, the donee will be classified as a farmer for tax purposes and the value of the inheritance/gift will be reduced to 10%.
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Athlone, Co Westmeath.
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