Dáil Éireann debate -
Thursday, 5 Jul 1951

Vol. 126 No. 7

Finance Bill, 1951—From the Seanad.

The Dáil went into Committee to consider a recommendation from the Seanad.

Minister for Finance (Mr. MacEntee)

I move that the Committee agree with the Seanad in the following recommendation:—

SECTION 19.

1. That before Section 19 a new section be inserted as follows:—

(1) This section applies to every conveyance or transfer and every lease (whether a conveyance, transfer or lease executed before or after the passing of this Act) of a house in respect of which a grant has been or will be made under Section 16 of the Housing (Amendment) Act, 1948 (No. 1 of 1948), or under Section 6 of the Housing (Amendment) Act, 1950 (No. 25 of 1950), being a conveyance, transfer or lease—

(a) which under the enactments in force immediately before the passing of this Act would have been proper to be charged with stamp duty by reference to sub-section (1) or sub-section (3) of Section 13 of the Finance (No. 2) Act, 1947 (No. 33 of 1947), or sub-section (1) or sub-section (3) of Section 24 of the Finance Act, 1949 (No. 13 of 1949), and

(b) which is to a person—

(i) who is the person to whom the said grant has been or will be paid, or

(ii) who is a member of the public utility society to which the said grant has been or will be paid,

as the case may be.

(2) Section 13 of the Finance (No. 2) Act, 1947, and Sections 24 and 25 of the Finance Act, 1949, shall not apply and shall be deemed never to have applied to any instrument to which this section applies and, where the amount of duty paid in respect of any such instrument exceeds the amount which would have been chargeable if those sections had not been enacted, the excess may be repaid.

(3) An instrument to which this section applies and which is stamped at a rate less than the rate which, but for the provisions of this section, would be chargeable by reference to sub-section (1) or sub-section (3) of Section 13 of the Finance (No. 2) Act, 1947, or sub-section (1) or sub-section (3) of Section 24 of the Finance Act, 1949, as may be appropriate, shall be deemed not to be duly stamped unless the Revenue Commissioners have expressed their opinion thereon in accordance with Section 12 of the Stamp Act, 1891.

This is a recommendation from the Seanad which relieves the taxpayer who was charged stamp duty on the conveyance of a house and land at the rate of 5 per cent.; the relief proposed is that in certain circumstances the Revenue Commissioners will reduce the stamp duty to 1 per cent. I ask the Dáil to agree with the recommendation which has been made by the Seanad, and if the House is disposed to accept the recommendation to-day I shall be grateful.

General Mulcahy

Better take it how, Sir.

Mr. S. Collins

Will the Minister explain the full import of the recommendation?

Mr. MacEntee

Under the Housing (Amendment) Act, 1950, grants are payable to persons who purchase new houses from builders. The documents transferring such houses from the builders to the purchasers are liable to an ad valorem stamp duty on the purchase of the houses. Under the Finance Acts of 1947 and 1949 the rate of this duty would have been 5 per cent. In the average case, the duty would amount to between £90 and £100. The House will appreciate that this would have meant that a person getting a grant of £275 from the Government to help him to purchase the house would have been obliged, at the same time, to pay out in stamp duty a sum representing a considerable proportion of the grant. To remedy this anomaly it was provided in the Housing (Amendment) Act of last year that a national buying a house should not have to pay stamp duty at a higher rate than 1 per cent. on the price of the house with the proviso that the relevant document should have endorsed on it a certificate, under the seal of the Minister for Local Government, that a grant would be paid to the purchaser in respect of the house.

It has happened in some cases—very few—that solicitors have presented documents for stamping which did not bear as an endorsement the certificate of the Minister for Local Government. Accordingly, these documents were marked and stamped 5 per cent. Subsequently the documents were endorsed and a claim made for the refund of the duty. The Revenue Commissioners, under the Stamps Act, could not make the refund. One of the purposes of this section is to relieve that hardship and to enable them to refund the difference between the duty as paid at 5 per cent. and the duty which would normally have been payable if the conveyance had borne the endorsement of the Minister for Local Government.

Another case has arisen. Normally no stamp duty is attracted in respect of a house qualifying for a grant under the Housing (Amendment) Act, 1948, because what the document usually does is to deal merely with a plot of ground on which a house is to be built by the purchaser. In some cases, however, the lease or conveyance has been delayed until the house has been built and it has been a condition of the bargain that the lease would not be granted until the price of the house had been paid to the builder. In such cases, the documents would attract duty at the ad valorem rate of 5 per cent. Here again, we have a similar anomaly to that to which I have already referred—where, on the one hand, a grant of £275 is given and, on the conveyance being stamped for paying at the ad valorem rate of 5 per cent., the Government takes back with the other hand between £90 and £100. The second purpose of the proposed recommendation is to enable the duty upon the house and lands in this case to be assessed at 1 per cent. instead of 5 per cent. which the document would otherwise bear.

Mr. Sweetman

With regard to the first point which the Minister has mentioned on this recommendation, I think it largely arose in the beginning because, though the Housing Act of 1950 was passed somewhere about the end of the Session last year—about July last—copies had not got down the country in sufficient time and the machinery in operation for the affixing of the seal of the Minister was not then fully operative. I know of cases where solicitors were afraid that if they did not stamp the month during which every deed must be stamped would have run out and therefore they stamped the documents at 5 per cent., believing they would be entitled to get back the 4 per cent. afterwards. It was then found, as the Minister said, that the enactments did not provide for that refund and, accordingly, the provision that the Minister is now making covers that point.

In regard to the second, as I understand the Minister, where a lease is being made in consideration of the expense incurred or to be incurred by the lessee in the erection of a house and in consideration of the covenants included, the effect of this will now mean that the expense incurred could only be assessed at 1 per cent. The position in that regard was, until recently, I think, that the Revenue Commissioners did not assess duty on the value of the house to be built in accordance with the building covenant. I have heard complaints recently from solicitors that the new departure by the Revenue Commissioners is a departure for which they cannot ascertain the legal reasons. I can quite understand the case where the Minister mentions that the lease actually provided and expressed a stipulation that the money was to be paid over to the builder or to a building society, but I would like the Minister to make this clear to the House if he can.

If a lease is made of a site and at the time that the lease is made there is no building on the site but the lease includes a covenant that a house, say of the value of £2,000, will be erected by the lessee after the date of the lease, will that lease then bear the stamp duty on the value of the covenant or will it not? I submit it should not. I submit that if the lease merely provides that in future the lessee will, in pursuance of his covenant, erect a house, then there is no authority for assessing stamp duty on the value of that covenant and the stamp duty can only be assessed on the rent reserved. If, on the other hand——

Captain Cowan

Has not that always been the practice?

Mr. Sweetman

Until recently.

Mr. O. Flanagan

Thanks to Captain Cowan.

Captain Cowan

No thanks to Captain Cowan.

Mr. Sweetman

Until recently that was always the practice, but I have been told by solicitors that that practice has varied.

Captain Cowan

How recently?

Mr. Sweetman

I want to discuss this matter in a non-political atmosphere.

Captain Cowan

You had better tie up Deputy Flanagan who is seated behind you.

Mr. Sweetman

If the Deputy himself made his point after me and did not interrupt me, it would be easier to discuss the matter in a non-political atmosphere because I might be tempted equally with Deputy Flanagan. If the lease includes the provision to which the Minister refers, namely, that the house had actually been built and that the money must be paid over before the lease attained validity, then I can appreciate the position. But if it is purely a covenant in futuro, then I suggest to the Minister that the practice which I am told by other solicitors to have been experienced by them may be remedied. These solicitors were asked to lodge the lease for adjudication and when it was being adjudicated upon stamp duty was charged on the value of the house that was being erected. It may be that that provision arises because of the section which the Minister is now clearing up in this recommendation which comes from the Seanad. If so, the matter will be resolved for those people for the future.

Mr. MacEntee

The first point is where, as Deputy Sweetman has said, the lease provides that the building is to be erected and the lease is actually granted even with a covenant in it. In those circumstances, the stamp duties charge is only on the land.

Mr. Sweetman

On the rent, I think.

Mr. MacEntee

I am sorry, on the rent, but cases have arisen where the lease was not actually granted until the house had been erected and the builder had been paid. In that case, some solicitors raised the point following on articles which appeared in the Irish Law Times and Solicitors' Journal. They insisted upon the Revenue Commissioners directing their attention to the particular point that was being raised in these articles. As it appeared, on investigation, that the lease belonged to that class, the Revenue Commissioners had no option except to charge the stamp duty at the 5 per cent. rate. One of the purposes which will be attained if the House adopts the recommendation from the Seanad will be to enable the Revenue Commissioners, in that particular type of case, to mark the lease for stamp duty at 1 per cent.

Captain Cowan

That is a big improvement.

Question agreed to.

Recommendation reported and agreed to.

Bill amended accordingly.