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Consideration

  1. Overview
  2. Leases
  3. Transfers of property
  4. VAT-exclusive consideration
  5. Consideration in a foreign currency
  6. What if you do not know the consideration?

Transfers of property

When you buy property, the consideration is the amount of money you pay for it, excluding any Value-Added Tax (VAT).

  • Example 1

    You buy a commercial premises for €200,000.

    An instrument (usually called a Deed of Transfer) is executed (signed, sealed or both) to transfer the premises to you.

    You pay Stamp Duty on €200,000.

  • Example 2

    You buy shares for €10,000.

    An instrument (usually called a Stock Transfer Form) is executed to transfer them to you.

    You pay Stamp Duty on €10,000.

However, the consideration may not always be entirely money. You may take responsibility for repaying a debt owed by the seller or transferor of the property (usually called assumption of a debt). You may have a property transferred to you to pay off a debt owed to you (usually called satisfaction of a debt). You may transfer shares to the seller.

You pay Stamp Duty on the value of the debt or the shares.

Assumption of a debt

When you take responsibility for repaying a debt, Stamp Duty is chargeable on the higher of:

  • the amount of the debt assumed (including a mortgage) plus any other consideration paid
  • or
  • the equity of redemption. The equity of redemption is the difference between the market value of the property and the debt assumed. In other words, the equity of redemption is the net value of the property.
  • Example 3 (cash and debt assumed; no gift involved)

    Mary sells a non-residential property, valued at €80,000 for €65,000 to you.

    You also agree to pay off a debt of €15,000 which she owes to John.

    You pay Stamp Duty on the purchase price of the property (€65,000) plus the debt you assumed (€15,000). You pay Stamp Duty on €80,000.

  • Example 4 (cash and debt assumed; no gift involved)

    Declan bought a house in 2011. He got a loan from his bank to help him finance the purchase.

    Declan sells the house to you in 2019. The value of the house is €335,000 but Declan sells it to you for €220,000 plus the outstanding loan amount.

    The amount outstanding of the loan is €115,000.

    The value of the loan plus the consideration paid is €335,000 (€115,000 + €220,000).

    The equity of redemption is €220,000 (€335,000 - €115,000).

    You pay Stamp Duty on €335,000 as that is the higher amount.

  • Example 5 (no cash and debt assumed; partial gift)

    Ronan transfers non-residential property, value €50,000, to you as a gift.

    There is a debt of €15,000 charged on the property.

    You agree to take responsibility for repaying that debt.

    The equity of redemption is €35,000 (€50,000 - €15,000).

    You pay Stamp Duty on €35,000 as that is the higher amount.

    If the debt assumed was €42,000, you would pay Stamp Duty on €42,000 as it is higher than the equity of redemption. The equity of redemption is €8,000 (€50,000 - €42,000).

  • Example 6 (cash and debt assumed; partial gift)

    Ken transfers property valued at €100,000 to you.

    You agree to take responsibility for repaying a debt of €40,000 which Ken owes to Tom. You also pay cash of €5,000 to Ken.

    The total consideration is €45,000 (€40,000 + €5,000).

    The equity of redemption is €60,000 (€100,000 - €40,000).

    You pay Stamp Duty on €60,000 as that is the higher amount.

  • Example 7 (cash and debt assumed; partial gift)

    Jane transfers property valued at €50,000 to you.

    You assume a debt of €30,000 that Jane owes to her bank.

    You also pay cash of €5,000.

    The total consideration is €35,000 (€30,000 + €5,000).

    The equity of redemption is €20,000 (€50,000 - €30,000).

    You pay Stamp Duty on €35,000 as that is the higher amount.

  • Example 8 (no cash and debt assumed; partial gift)

    Peter and Donal have a joint mortgage on a house.

    Peter sells his half share in the house to Donal for €160,000.

    In addition, Donal takes over payment of the outstanding mortgage.

    The outstanding mortgage (or mortgage redemption figure) is €120,000.

    The debt assumed by Donal is €60,000 (€120,000 ÷ 2).

    Donal, therefore, pays Peter €220,000 (€160,000 + €60,000) for Peter's half share of the house.

    The market value of the house is €500,000.

    The equity of redemption is €380,000 (€500,000 - €120,000). However, this is divided by 2 to give a figure of €190,000 as the property was jointly owned with a joint mortgage.

    Donal pays Stamp Duty on €220,000 as that is the higher amount.

Note

If the property is in negative equity, Revenue accept Stamp Duty paid on the market value of the property. This applies whether the mortgage relates to residential or non-residential property. Negative equity means that the current value of your property is less than the amount outstanding on your mortgage. In other words, you owe the bank more money than what you would get for the sale of your property.

Satisfaction of a debt

In the case of the satisfaction of a debt, Stamp Duty is chargeable on the higher of:

  • the amount of the debt plus any other consideration paid
  • or
  • market value.
  • Example 9

    Tom owns a farm.

    Tom owes you €50,000.

    To pay off that debt, Tom transfers land valued at €50,000 to you in February 2019.

    You also pay €5,000 to Tom as part of the agreement.

    You pay Stamp Duty on the value of the land plus the cash you paid to Tom, that is, €55,000.

Transfer of shares

You pay Stamp Duty on the value of the shares transferred.

  • Example 10

    Irene sells you a house valued at €250,000 in February 2019.

    You pay her €200,000 cash plus €50,000 worth of shares you own in Uptown Ltd.

    You pay Stamp Duty on the instrument transferring the house.

    You pay Stamp Duty on €250,000 which is the combined value of the cash payment and shares.

    An instrument will be needed to transfer the shares to Irene so she will pay Stamp Duty on €50,000.

  • Example 11

    Peter grants you a right of way over his property for €6,000 in March 2019.

    Instead of paying cash you transfer 100 shares in XYZ Ltd worth €6,000 to Peter.

    You pay Stamp Duty on the instrument creating the right of way.

    You pay Stamp Duty on €6,000

    An instrument will be needed to transfer the shares to Peter.

    Peter will pay Stamp Duty on €6,000.

Distributions in specie

You may be a shareholder in a company. The company may own assets, for example, office buildings, residential properties, plant and machinery.

If the company goes into liquidation or is wound-up those assets are held for the benefit of the creditors of the company.

Once the creditors are paid, any remaining assets become the property of the shareholders. Those assets may be sold, and the cash given to the shareholder.

Alternatively, the assets could be transferred to the shareholders in the proportion of their shareholding.

The transfer of assets, rather than cash, is called a ‘distribution in specie’. Stamp Duty is not chargeable on an instrument that transfers assets in this way. You do not file a Stamp Duty return.

However, Stamp Duty is chargeable if:

  • the assets are the subject of a charge (mortgage) and they are transferred subject to that charge
  • the company owes a debt to a third party and the shareholders agree to assume liability for the debt
  • the company owes a debt to the shareholders and the shareholders agree to forgive the debt.

Next: VAT-exclusive consideration

Published: 13 June 2024 Print this page

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