The Gazette 1987

GAZETTE

MARCH 1 9 87

period as the Revenue Com- missioners allow). If the Stamp Duty is paid on the contract or agreement: (i) the conveyance is not chargeable. (ii) the Revenue Commis- sioners will denote or transfer the stamp on pro- duction of the stamped contract or agreement and (iii) the Duty will be refunded if This section presumes a contract or agreement to be in existence and to be in writing and if there is one, once the purchaser enters into possession, Stamp Duty is payable in exactly the same way as Stamp Duty is payable on the ordinary conveyance on sale. The practice of effecting a surrender without a prior contract or Agreement continued where the Parties, in effect, trusted each other and did not reduce the contract or agreement to writing. There is no compulsion on the taxpayer to submit the Instrument for stamping but it is an unstamped title document in these circum- stances. The vendor cannot preclude any Objections or Requisitions as to the stamping of any document executed after the 16th day of May, 1888 (see section 117 of The Stamp Act, 1891 - ex parte Birkbeck Freehold Land Society (1883) 24 C.H.D. 11 9 and Abbott -v- Stratton 3.S & L. 603 where an agreement to leave a document unstamped in a loan transaction, the borrower to pay any penalty if the stamping became necessary at any time, was not upheld by the Court - it was an attempt to evade Stamp Duty.) Statutory Instrument Number 151 of 1985 (now incorporated into sections 96 and 99 Finance Act, 1986) made dramatic changes. These two sections appear to end certain methods of Stamp avoidance (of which Ingram was a parallel). In fact section 96 would fall directly on the Ingram decision - the use of an arrangement where a vendor enters into an agreement to grant a long lease to a purchaser and then agrees to sell the contract or agreement is rescinded or annulled.

Stamp Duty and Mergers

Stamp Duty on Leasehold Mergers/Surrenders Since the recent Ramsay Case in the U.K., followed by I.R.C. -v- Burmah OH Company Limited (1981) 54 T.C.200 and the famous (or infamous) Furniss -v- Dawson (1984) A.C.474 steps inserted into transactions solely for tax avoid- ance purposes would have no effect. The Ramsay decision to a certain degree appears to be relied upon by the Revenue Commissioners although the cases are in course of being tested in Ireland. In the realm of Stamp Duties in the U.K., these cases were held to have effect in Ingram -v- I.R.C. [1986] 2 W.L.R. 598). There, steps inserted into a transaction seeking to make use of the exclusion from the charge to duty of Agreements for leases for terms exceeding 35 years under section 75 of the U.K. Stamp Act, 1971 would be disregarded. There is no equivalent section in Ireland but the principle laid down in this case could equally apply to other arrangements which have been utilised here. It is doubtful however, if any arrangement prior to the 11th June, 1985 would be called into question. Duty was payable on the full purchase price - as per Mr. Justice Vinelott on Appeal. The facts of that case were as follows: In 1984 a taxpayer wished to purchase a freehold property for £145,000.00. Four documents were executed to reduce the amount of Stamp Duty that would have been payable had the taxpayer acquired the house by the normal contract and conveyance. The taxpayer (purchaser) and the vendor made an Agreement for a 999 year lease of the property at a premium of £145,000.00, and an annual rental of £25.00. Four days later the vendor contracted to sell the

by BRIAN A. BOHAN, Solicitor property subject to the agreement for the lease to a Company for £500.00. Two days later, the Company agreed on a sub sale of the freehold to the taxpayer for £600.00, and shortly there- after the property was con- veyed to the taxpayer in accordance with the earlier agreements and the payments to the vendor of £145,000 and £500.00. The Inland Revenue Com- missioners adjudicated that Duty was chargeable on the conveyance at the full con- sideration, namely, £145,000.00 which was upheld in the High Court, Chancery Division. In the U.K., section 111 of the Finance Act, 1984 now prevents schemes of this sort from achieving their purposes with effect from the 20th March, 1984, although Ingram took place before the 1984 Act. Irish Legislation on the subject of Stamp Duty schemes began with the imposition of Duties S.I. No. 101 of 1977, and now section 31 of the Finance Act, 1978 which affected Stamp Duty on the surrender of leases. Under that section a contract or agreement for the sale of any leasehold interest in any immovable property is charged with ad valorem Duty if:- (a) the purchaser enters into possession before the execution and stamping of the conveyance, and (b) the conveyance is not stamped within 9 months of first execution of the contract or agreement (or such longer

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