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Dáil Éireann debate -
Tuesday, 11 Dec 2001

Vol. 546 No. 3

Written Answers. - Tax Code.

Olivia Mitchell

Question:

164 Ms O. Mitchell asked the Minister for Finance if he will reduce the 9% stamp duty applicable to elderly residents purchasing reversionary interests. [31439/01]

It is assumed that the "9% stamp duty" referred to in the Deputy's question is the flat rate of stamp duty which was applicable to investors buying second hand residential property prior to 6 December 2001. The Finance (No. 2) Act, 2000 introduced a flat 9% rate of stamp duty for residential property bought by investors. From 27 February 2001 relief from the 9% rate was introduced for investors purchasing new residential property.

In Budget 2002, on 5 December 2001, I introduced changes to the stamp duty rates payable by investors in both new and second-hand residential property. From 6 December 2001, purchasers of such properties will pay the same rates as already paid by owner occupiers who purchase second-hand property. For ease of reference the rates now applicable to second-hand residential property are the following:

Aggregate Consideration £

Aggregate Consideration (Effective 01/01/02)

Reduced Rate (First Time Buyers)

Full Rate (Other Owner Occupiers/Investors 2nd hand properties)

Up to £100,000

Up to 127,000

Nil

Nil

£100,001-£150,000

127,001-190,500

Nil

3.00%

£150,001-£200,000

190,501-254,000

3.00%

4.00%

£200,001-£250,000

254,001-317,500

3.75%

5.00%

£250,001-£300,000

317,501-381,000

4.50%

6.00%

£300,001-£500,000

381,001-635,000

7.50%

7.50%

Over £500,000

Over 635,000

9.00%

9.00%

In an equity release situation, the reversionary interest referred to by the Deputy is normally purchased by a company-individual from an elderly resident who continues to live in the property for the remainder of his-her life. It is this company-individual who is liable to pay the stamp duty arising on this type of purchase – and not the elderly resident. Stamp duty is chargeable on the amount of the consideration paid by the company-individual to the elderly resident which would represent the value of the equity which has been released.
As a result of the changes that I announced in my budget speech last week, the Deputy will see from the table provided above that there are now only two rate structures applying to second-hand residential property purchased on or after 6 December 2001. There is the reduced rate structure for first time buyers who must comply with certain conditions and the full rate structure which applies to both other owner occupiers and investors.
As a result of the budget, the rate of stamp duty applicable to reversionary interest purchases under £500,000, 635,000, has been effectively reduced from the previous flat 9% to a range varying between nil and 7.5%. Moreover, in the event that the purchaser was a relative of the elderly resident, the purchase would attract stamp duty at half the appropriate rate otherwise applicable.
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