Stamp Duty on commercial property 

The rate of stamp duty on commercial property transactions was increased from 2% to 6% with effect from midnight on Budget Day, 10th October 2017. When the Budget was announced two aspects of the new measure were unclear:

  • Whether transitional measures would apply in respect of contracts entered into prior to the Budget but not completed/executed and 
  • Whether the 6% rate applies to transfers of agricultural land.

Both matters have been clarified in the Finance Bill.

  • The 2% stamp duty rate will continue to apply where a binding contract to purchase commercial property was entered into prior to 11 October 2017 provided the instrument of transfer is executed before 1 January 2018. The instrument must contain a statement in a format specified by Revenue to the effect that it was executed in pursuance of a binding contract entreated into prior to 11 October 2017. 
  • Transfers of agricultural land are also liable to the 6% rate of stamp duty but where consanguinity relief applies on inter-family transfers a 1% rate applies until 1 January 2021. The upper age limit of 67 for the transferor is also being abolished.

A stamp duty refund scheme was also announced on Budget Day in relation to the purchase of commercial land for the development of housing. Developers must begin to develop the land within 30 months of purchasing the land to avail of the relief. Further details will be contained at the Committee Stage of the Finance Bill. 

The Finance Bill also increased the threshold for the application of stamp duty on residential leases for less than 35 years from €30,000 rental income per annum to €40,000. The Bill also confirms that the increased 6% rate also applies to non-residential lease premiums, subject to the transitional measures as outlined above.

CGT 7-year exemption 

Finance Bill legislates for the Budget Day announcement to reduce the holding period to qualify for the CGT exemption on disposal of properties purchased between 7 December 2011 and 31 December 2014, from 7 years to 4 years. The amendment applies to disposals on or after 1 January 2018. The reduction in holding period applies to all land and property in Ireland or another EEA state purchased in the qualifying period that was eligible for relief. 

There is no change to the rules applying where such properties are disposed of after 7 years and it would appear that these gains will continue to qualify for proportionate relief based on the ownership period.

Help to Buy 

No changes were announced to the Help to Buy Scheme (HTB) in the Budget or Finance Bill. A report commissioned to assess the HTB was published with the Budget documents. It concluded that there is no evidence to date that the HTB is impacting the price of homes for first-time buyers.

Mortgage Interest Relief 

A tapered extension of Mortgage interest relief for residential property owners who took out qualifying loans between 2004 and 2012 is legislated for. The relief will be available on a tapered basis - at a rate of 75% in 2018, 50% in 2019 and 25% in 2020. It will cease entirely in 2021. 

There was no reference in the Budget speech to interest relief on rented residential property. Budget 2017 announced that 100% relief for mortgage interest on rental properties would be restored on a phased basis by 2020, with 85% interest relief available in 2018.

Deduction for pre-letting expenses 

Property owners who rent out residential property that has been vacant for 12 months or more will be able to obtain a tax deduction of up to €5,000 (per property) for pre-letting expenses that are revenue in nature. This relief will be clawed back if the property is withdrawn from the rental market within 4 years. The relief will be available for qualifying expenses incurred up to the end of 2021.

This was the only measure implemented from the report of the Working Group that examined the tax and fiscal treatment of landlords, also was published on Budget Day. Nine other potential policy options for change, split into short, medium and long-term measures were included in that report.

Vacant Site levy 

Changes to the vacant site levy are not contained in the Finance Bill but expected to be made by amendment to the Urban Regeneration and Housing Act 2015. 

On Budget Day it was announced that the vacant site levy would more than double from the current rate of 3% to 7% for second and subsequent years of “hoarding” land. The vacant site levy comes into effect in 2018. From 1 January 2017, each local authority must maintain a register of vacant sites and are required to include on the register, details of any site, which in their opinion, has been vacant for the previous 12 months.

Return to: Budget 2018 Analysis