Consideration
What if you do not know the consideration?
You may not know the final price on the date of execution (signing, sealing or both) of the instrument (written document). In this case, you pay Stamp Duty on the market value of the property.
There are four exceptions to this rule.
Exception 1
When you buy a business, the agreement to transfer the business to you (usually called a business asset transfer agreement) may provide for:
- an initial payment
- and
- an adjustment when the final net value is known.
The adjustment may result in a further payment or refund at a later agreed date.
- Example 1
You sign a business asset transfer agreement on 1 March 2019 to transfer the assets of ABD Ltd to you. The consideration is the net value of the assets of the business on 28 February 2019.
The final net value will be known on 1 July 2019 when the audited accounts are prepared.
The agreement states that you will:
- pay €150,000 on 1 March 2019 (initial payment)
and
- make a further payment, or receive a refund, on 18 July 2019 when the final net value of the assets is known.
Stamp Duty may be paid on the market value. If you do not pay Stamp Duty on the market value, you can alternatively:
- indicate on the Stamp Duty return that you do not have the final consideration
- file the return
- pay Stamp Duty on the initial payment.
If the final consideration is higher you should amend your return to the final consideration and pay the additional Stamp Duty due.
You will be charged interest if you are late paying the extra duty. If you want the interest removed, you should write to the National Stamp Duty Office. You should include your Document ID and reasons why the interest should be removed in your request.
If the final consideration is lower, you may claim a refund of the Stamp Duty overpaid. You should amend your Stamp Duty return before claiming the refund.
Note
Exception 1 does not apply to consideration that is linked to the performance of the business in the years following the acquisition. Such consideration might be expressed in terms of a formula related to after-tax profits and may be capped at a specified amount.
Exception 2
If you buy shares and you agree to pay:
- an initial payment
- and
- an adjusted payment when completion accounts are ready
you should:
- indicate on the return that you do not have the final consideration
- file the return
- pay Stamp Duty on the initial payment.
- Example 2
You sign a share purchase agreement on 1 March 2019 to buy the shares of ABD Ltd. The consideration is the value of the shares on 28 February 2019.
The final value will be known on 1 July 2019 when the completion accounts are prepared.The agreement states that you will:
- pay €150,000 on 1 March 2017 (initial payment)
- make a further payment, or receive a refund, on 18 July 2019 when the final value of the shares is known.
The adjusted consideration may be higher or lower than the consideration you included in your initial return.
You should follow the process outlined in Exception 1 above for dealing with this.
Exception 3
In the case of a lease, if at the date you execute the instrument, you know the:
- rent but not the premium
- you pay Stamp Duty on the rent and the market premium
- premium but not the rent
- you pay Stamp Duty on the premium and the market rent.
You pay Stamp Duty on the market premium, if you do not know either the rent or the premium.
- Example 3
You sign a lease for five years. You agree to pay an annual rent of €2,000.
You also agree to pay a premium, but the amount of the premium will not be known for four months.
You pay Stamp Duty on:
- the average annual rent (€2,000)
and
- the premium that could be obtained for a lease for 5 years with an annual rent of €2,000.
- Example 4
You sign a lease for five years.
You do not know what the rent or the premium payable will be for another two months.
You pay Stamp Duty on the premium that could be obtained for a lease for five years if no rent was payable.
Exception 4
You pay Stamp Duty on ten times the market value of a site if:
- you lease or buy the site with a connected building agreement to build residential property on it
- and
- you do not know the full consideration.
- Example 5
You agree with a developer:
- to buy a site for €100,000
and
- that he will build a house on that site for you.
Both agreements are connected; you cannot buy the site without the house being built on it.
When you file the Stamp Duty return for the residential property, you do not know the final building cost.
You pay Stamp Duty on 10 times the market value of the site at the date of the instrument.