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National Reserve SFP

  • 10-11-2009 9:19pm
    #1
    spoutwell
    Closed Accounts Posts: 82 ✭✭


    I've been going through the mill over the last 6 years to get a bit of land transferred from a parent. Now I've given up and I've applied for REPS and the SFP (a bit late I know).
    I don't have a lease on the place and its not in my name. I'm farming it with my own herd no.
    The Dept. aren't happy with the standard REPS covering letter from the parent that the place is at my disposal for the length of the plan - its been ok for the REPS people but not the SFP.
    I've been told a lease might attract stamp duty.
    Has anyone come up with any sort of a 'legal document' that might satisfy them and get me into the SFP club?


Comments

  • #2
    Bitten & Hisses
    Registered Users, Registered Users 2 Posts: 1,202 ✭✭✭Bitten & Hisses


    spoutwell wrote: »
    I've been told a lease might attract stamp duty.

    Stamp duty on a lease is a pittance.


  • #3
    spoutwell
    Closed Accounts Posts: 82 ✭✭spoutwell


    Bitten & Hisses wrote: »
    Stamp duty on a lease is a pittance.

    I was more worried about the difference between a 'nominal' rent in a lease and a market rent, which might be considered a gift and attract highter tax.


  • #4
    Username John
    Closed Accounts Posts: 4,237 ✭✭✭Username John


    spoutwell wrote: »
    I was more worried about the difference between a 'nominal' rent in a lease and a market rent, which might be considered a gift and attract highter tax.

    My understanding here is as follows, I'm not an accountant, so this may not be 100% correct...
    Lease has to be market value, as if it goes to the revenue and they feel its below market value, they will be back to you. As this affects the stamp duty payment, which is a % of the agreement.

    If you have a lease drawn up, its now income for your parent, as they are officially renting it. So you might want to check how this would affect them. I think there is a clause you can put into a lease that says something like "lease of x euro per year, if demanded" which means its not a proper source of income. You'd need to check that though.

    If you don't pay them - I assume its considered a gift, so this would come off your tax-free gift tax threshold between a parent and child, I think its something around 500k+?
    But that limit might change in 2 weeks in our new budget... ;)

    I would say talk to an accountant...


  • #5
    johnstown
    Registered Users, Registered Users 2 Posts: 104 ✭✭johnstown


    Difference between nominal and market rent is deemed to be a gift each year. Will the gift element be less than the €3000 annual tax free threshold? Will the Revenue cop it? If worried, draft lease so that it is subject to rent review or can be cancelled where mutual agreement.

    Stampt duty is usually pittance, 1% of annual rent.... However, seeing as you would not be at arms length you need to get a valuation report and a warrant adjustication filled out. Where below market value, stamp duty is charged on the gift element x years. For example, say market rent is €10,000, nominal value is €4000 and term is 7 years. This works out at 6000 x 7 = 42,000. Applicable stampt duty rate = 4% or €1,648.

    There is a big difference between €1,648 and €100 (1% of annual market rent).

    To see stamp duty rates, refer to http://www.revenue.ie/en/tax/stamp-duty/current-rates-duty.html Stamp Duty on Non-Residential Property.


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