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G A Z E T T E
N O V E M B E R 1976
MEMORANDUM
Re: Liability of new houses which are exempt
from stamp duty to ad valorem stamp duty
Changes in the conditions under which newly built
houses qualify for Certificates of Reasonable Value
(and as a consequence are exempt from Stamp Duty on
the first assurance of such houses) have resulted in a
notable reduction in the number of houses qualifying
for such exemption.
There are two key factors which affect the position.
The first is the nature of the contractual relationship
between the builder and the purchaser and the second
the stage of completion of the house at the date such
contractual relationship is entered into.
If, under the contract for the sale or lease of the site,
the purchaser is entitled to an assurance of the site,
then
ad valorem
duty will be calculated only on the
purchase price of the site together with the Stamp Duty
on any Ground Rent (subject to what is said later about
the stagi of construction of the house at the date of
the contract). This is so, even if the assurance includes
a covenant by the Purchasers to erect a dwellinghouse
on the property to plans and specifications to be ap-
proved of by the Grantor/Lessor and to enter into a
building contract with John Doe & Co., Ltd., Building
Contractors to build a house on the said site at a price
of £ . . .
If the Contract for Sale or lease provides that the
obligations of the Grantor/Lessor are subject to com-
pliance by the purchaser with the terms of a particular
concurrent Building Contract, then
ad valorem
duty
will be charged on the total consideration contained
in both the Contract for Sales/Lease and the Building
Contract, e.g. if there is a clause providing for the for-
feiture of the right to the assurance if the builder is
not paid on foot of the building contract.
If there is a clause in the Agreement for Lease/
Sale providing for forfeiture of the right to the assur-
ance if the Builder is not paid on foot of the Building
Contract,
ad valorem
stamp duty will be paid on the
price in the Building Contract. Such Duty would not
be payable if the Agreement for Sale/Lease only pro-
vided for such forfeiture if the house is not built on
the site within a specified time.
Many builders combine Building Agreements and
Agreements for Lease in the one document. It is pos-
sible to do this without attracting a liability for
ad val-
orem
duty on the Building price but it is probably
safer to use Agreements.
Even if the Contract for Sales or Lease and the Build-
ing Contract are not linked in any way,
ad valorem
duly will be chargeable if at the time the Contracts or
agreements were entered into, the house was "sub-
stantially completed". The test is not so much the
amount of work done but whether there are "substan-
tial works" to be completed on the house before it is
finished.
We have made inquiries from house builders and
are advised that the usual stages of building of a dwel-
linghouse on a Building Estate are: —
1. The pouring of foundations.
2. The completion of the sub-floor and drains and con-
struction of walls to damp-proof course level.
3. The construction of walls to the wall plate level
(ready to take the roof).
4. Roofing (including the completion of tiling and gut-
tering).
5. First fixing (this includes the first fixing of carpentry
electrical wiring and plumbing).
6. Glazing (which may sometimes be postponed until
after the plastering).
7. Plastering (both inside and outside).
8. Second fixing of carpentry plumbing and electrical
wiring.
9. Decorating and finishing.
The Revenue Commissioners accept that prior to
roof level there would be no question of
ad valorem
duty being payable, subject of course to evidence sat-
isfactory to them being produced to that effect. The
Revenue Commissioners do not have any hard and fast
rule as to what exact stage they will decide that there
is no longer substantial work to be completed on any
particular house.
Certainly if three quarters of the amount of money
relating to any house had already been expended (ex-
cluding the site value) they say that there will no longer
be substantial work to be completed and
ad valorem
duty would be payable on the entire price. In between
roof level and this stage, each case will be dealt with
on its merits.
Evidence of Stage of Construction
The Adjudication Office were seeking evidence from
Solicitors by way of Statutory Declaration as to the
stage of construction of houses. The Law Society made
representations to the Revenue Commissioners in this
connection that it was inappropriate to insist upon
declarations from Solicitors. The Revenue Commis-
sioners have now indicated that for the future, they
will accept the Certificate of such independent profes-
sional person as would be acceptable to them. A Char-
tered Engineer or Architect who is a member of the
Institute of Architects or has satisfied the Revenue
Commissioners that he is a practising Architect in good
standing will be acceptable to them. Such Certificates
would have to state specifically that it was being given
on foot of inspection made personally. If the house had
not been roofed, the content of the Certificate will be
obvious. If it has been roofed, it would be advisable to
give the greatest possible detail of the stage of con-
struction of the house, detailing the work done and
the work to be done. It would be helpful also to give
particulars of the value of the work done as a pro-
portion of the total.
The Revenue Commissioners may require certificates
to be verified by Statutory Declaration or other evid-
ence in any particular case. Solicitors who act for
builders who are purchasing lands for building develop-
ment or are embarking on any project involving the
building of houses in respect of which certificates of
reasonable value are unlikely to be obtained, should
advise their clients fully of the need to arrange for
satisfactory evidence of the nature mentioned above
to be available. The ideal way would be for the Estate
Architect or Engineer to inspect each house at found-
ation level, wall plate level, roofing and completion so
as to be able to furnish detailed certificates if required.
There are two other categories of cases involved.
The first are the cases currently coming up for ad-
judication where the evidence which the Revenue Com-
missioners are now seeking is not available, and it is
now too late to obtain same. The Revenue Commis-
sioners have indicated that they feel that some indepen-
dent evidence should be furnished, but that a reason-
able view would be taken of such cases, provided of
course that there was nothing on the face of the docu-
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