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CIA/E T N
JANUARY/FEBRUARY 1982
Dealing in Land - A New
Risk for Purchaser's Solicitors
Since the coming into operation of the 1981 Finance
Act, many transactions which would previously have
been regarded as capital transactions may now be
regarded as "Dealing in or Developing" land, attracting
Income Tax rather than Capital Gains Tax. Unfortuna-
tely, because of the wide ranging nature of the
legislation, there is a hazard for purchasers of land or
buildings which they should guard against.
The new provisions apply to disposals on or after the
6th of April 1981, particularly of land or any property
deriving its value from land (e.g. shares in a property
holding company) which was acquired for the sole or
main object of realising a gain and provided that the
"gain" is to be regarded as income for tax purposes.
The provisions are contained in Sections 28 and 29 of
the Finance Act 1981, amending Sections 17, 18, 20, 21
and 22 of the Finance (Miscellaneous Provisions) Act
1968 and contain a power in the amended section 21 (2)
enabling the Revenue Commissioners, if it appears to
them that any person entitled to any consideration or
other amount chargeable to tax under Section 20
is not
resident in the State,
to order the deduction of tax at the
standard rate from such consideration (by applying
Section 434 of the Income Tax Act 1967). Such an order
could be directed at the purchaser or purchasers'
solicitor.
Apart from a purchaser's basic difficulty in knowing
whether his Vendor is a "person chargeable to tax" (as
there are circumstances in which some person other than
the apparent Vendor could be the person chargeable to
tax), the draughtsman, in adapting Section 488 and 489
of the U.K. Taxes Act 1970, which would appear to be
the source of the new provisions, has created a further
difficulty by ommitting any provision paralleling Sub-
Section 11 of Section 488 of the U.K. Act, which
enables a person who is about
to dispose of land
to
obtain a determination from an Inspector of Taxes
within 30 days as to whether the gain is to be chargeable
to tax as income.
It has been suggested that on an application being
made for a Clearance Certificate under paragraph 11 (6)
of the Fourth Schedule to the Capital Gains Tax Act
1975, the Inspector of Taxes is being put on notice of
the transaction and that if he does not then issue a
direction that Section 434 is to apply to the payment, he
would not subsequently be entitled to issue such a
direction. However, until such a situation has come
before the Courts and the matter has been determined
by them, it cannot automatically be assumed that no
subsequent direction could be made. Moreover, there
would appear to be nothing to prevent the Inspector
from issuing the Capital Gains Tax Clearance Certifi-
cate without prejudice to his right to treat the gain as
income subsequently and issue a direction that Section
434 of the Income Tax Act should apply.
While the legislation provides an exemption for a
private residence, it does so by reference to the
provisions of Section 25 of the Capital Gains Tax Act.
Because of this, it may not be possible for a purchaser to
accept a statement by the Vendor that the premises in
sale are exempt by reason of their being a private
residence.
It would appear therefore that at pre-contract stage it
would seem essential for a purchaser's solicitor to make
enquiries as to whether the Vendor or some person
standing behind the Vendor in the proposed transaction
may be a person "chargeable to tax". (This matter has
been highlighted by the letter from John F. Condon,
published elsewhere in this issue.)
The Law Society is pressing for the introduction of a
statutory provision for clearance along the lines of
Section 488 Sub-Section 11 of the U.K. Act and, in the
meantime, asking that Inspectors of Taxes should, as a
matter of practice, on receipt of an application for a
Capital Gains Tax Clearance Certificate indicate
whether they propose to order the deduction of Income
Tax from the consideration.
Land Registration Fees Order
The Land Registration Fees Order 1981 (Statutory In-
strument No. 370 of 1981) came into operation on 1
December 1981. The Order increases the whole range of
Land Registration charges and introduces a new max-
imum registration charge of £200, applicable to all tran-
sactions having a consideration in excess of £36,000.
The fee payable in the majority of cases of applica-
tions for full registration of title has been increased to
£12, which sum is also payable upon the registration of
a transfer other than a transfer on sale and upon the
registration of transmissions on death.
The fee for the issue of a Land Certificate is increased
to £5 and for the issue of a certified copy of a Land
Registry Map to £4.
The Order itself should be consulted for the full cost
of Land Registry fees now chargeable but, for conve-
nience, the scale of registration charges for transfers
and burdens under Item 8 of the Schedule to the Order
is set out below.
TABLE
Registration of transfers or burdens for which fees are
payable under Item 8 of the Schedule to the Order.
Value
Fees
V a l u e
Fees
£
£
£
£
1 - 1000
10.00
19001 - 20000
115.00
1001 - 2000
17.50
20001 - 21000
120.00
2001 - 3000
25.00
21001 - 22000
125.00
3001 - 4000
32.50
22001 - 23000
130.00
4001 - 5000
40.00
23001 - 24000
135.00
5001 - 6000
45.00
24001 - 25000
140.00
6001 - 7000
50.00
25001 - 26000
145.00
7001 - 8000
55.00
26001 - 27000
150.00
8001 - 9000
60.00
27001 - 28000
155.00
9001 - 10000
65.00
28001 - 29000
160.00
10001 - 11000
70.00
29001 - 30000
165.00
11001 - 12000
75.00
30001 - 31000
170.00
12001 - 13000
80.00
31001 - 32000
175.00
13001 - 14000
85.00
32001 - 33000
180.00
14001 - 15000
90.00
33001 - 34000
185.00
15001 - 16000
95.00
34001 - 35000
190.00
16001 - 17000
100.00
35001 - 36000
195.00
17001 - 18000
105.00
36000 -upwards
200.00
18001 - 19000
110.00
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