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GAZETTE
MARCH 1 9 87
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
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
the contract or agreement
is rescinded or annulled.
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
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