Government failing tenants burdened with stamp duty charges on top of spiralling rent costs

July 14, 2017

The government is failing thousands of tenants facing spiralling costs by refusing to act to cut stamp duty on rents above €2,500 a month, Social Democrats TD Catherine Murphy said today.

Deputy Murphy said figures published today show that some 55 per cent of three-bedroom Dublin city homes currently up for rent through online property firm Daft.ie are quoting above the €2,500 a month threshold.

According to analysis by Goodbody Stockbrokers, a third of apartments in the capital are also in the same price bracket. Stamp duty of 1 per cent is payable on private leases when the rent is above €30,000 per year (€2,500 a month).

The party’s co-leader has been raising the stamp duty anomaly in the Dáil in recent weeks. The Minister for Finance told her in a reply to a Parliamentary Question this week that he has no plans to change the basis of liability to stamp duty on leases. [See PQ replies below]

Deputy Murphy said:

“Rents in Dublin are spiralling and more and more students and young professionals have no choice but to share houses with their friends so they can pool their expenses and make ends meet.

“These are exactly the kinds of tenants that this little-known stamp duty rate affects. If you add stamp duty onto a €2,500 monthly rent, that’s €25 more a month that renters have to dig deep to find.

“Instead of looking for ways to help out struggling renters, the Minister for Finance is refusing to even consider changing the rules to offer some relief. The official attitude seems to be to throw thousands of renters upon the mercy of the market, and that is simply a shocking abrogation of responsibility.

“The Minister needs to do the right thing here – and that is to either raise the threshold at which the stamp duty charge kicks in, or introduce exemptions for stamp duty charges for tenants who are sharing rental costs.”

ENDS

14 July 2017

Notes to Editors:

QUESTION NO:  145
DÁIL QUESTION addressed to the Minister for Finance (Deputy Paschal Donohoe)
by Deputy Catherine Murphy
for WRITTEN ANSWER on 11/07/2017
To ask the Minister for Finance further to parliamentary question number 231 of 20 June 2017, if he will address the anomaly that has arisen whereby a number of persons sharing accommodation in circumstances in which the aggregate rent for that accommodation is in excess of €2,500 per month are liable for a 1% levy; if he will abolish this levy in respect of tenants sharing a rented property or to otherwise address this anomaly in view of escalating rents and the need for persons to share accommodation; and if he will make a statement on the matter.
REPLY.
My predecessor’s reply to Deputy Murphy’s Parliamentary Question number 231 of 20 June 2017 (alternatively numbered 26932/17) set out the stamp duty treatment that applies to leases of residential property.  The Deputy has now asked about the 1% stamp duty charge where a lease exceeds 35 years, or is for an indefinite term, and where the rent exceeds €30,000 per annum (or €2,500 per month).  As stated in the previous reply, where a lease is for an indefinite term, it is treated as a lease for a deemed fixed period of one year, with the lease growing each year by a further year.
The Deputy refers to an anomaly whereby the stamp duty charge applies in situations where a number of persons share a residential property with each of them contributing to the overall rent. I am advised by Revenue that there is no anomaly in such a situation and that the Stamp Duties Consolidation Act 1999 provides for this situation. Section 1 of this Act makes a lessee (i.e. a tenant) the accountable person for the stamp duty charge and section 2 provides for a situation where there is more than a single accountable person by making each accountable person jointly and severally liable for the stamp duty charge.  The 1% stamp duty charge is levied in relation to a lease and not in relation to an individual lessee.  Similarly, in relation to the purchase of a residential property, the same stamp duty charge applies regardless of the number of people involved in the purchase.
I have no plans to change the basis of liability to stamp duty on leases.

QUESTION NO:  231

DÁIL QUESTION addressed to the Minister for Finance (Deputy Paschal Donohoe)
by Deputy Catherine Murphy
for WRITTEN ANSWER on 20/06/2017

To ask the Minister for Finance the number of leases in each of the past five years for which figures are available on which stamp duty on residential leases has been paid at the 1% rate; the yield on this in each of these years; the specific statutory basis for the current exemption threshold of €30,000; the basis on which this has been set at this level; the date it was last altered; the previous threshold applying; and if he will make a statement on the matter.

REPLY.

I am advised by Revenue that a lease for property is subject to Stamp Duty on both the premium and the rent.  The rate of duty on the premium for all residential leases mirrors the rate applicable to conveyances for residential property, for the years in question this being 1% on the first €1 million, and 2% on any excess over €1 million.  The rate on the average yearly rent is 1% for a term not exceeding 35 years or for any indefinite term, and 6% for a term exceeding 35 years but not exceeding 100 years.  Where a lease is for any indefinite term, it is treated as a lease for a deemed fixed period of one year, the lease growing each year by a further year. A rate of 12% of the average annual rent applies where the length of the lease exceeds 100 years. It is assumed that the Deputy is referring to residential leases not exceeding 35 years or for any indefinite term.

Residential leases for a term not exceeding 35 years or any indefinite term where the rent does not exceed €30,000 per annum are exempt from Stamp Duty. The legislative basis for this exemption is contained within the Lease head of charge in Schedule 1 of the Stamp Duty Consolidation Act 1999. This exemption threshold was last amended by s. 125(1)(c) of the Finance Act 2008, where previously the threshold was €19,050.

The available Stamp Duty data identifies short term leases on residential property which would include residential leases not exceeding 35 years or any leases for any indefinite term where rent exceeds €30,000 per year (liable to a rate of 1%) and leases for a term exceeding 35 years but not exceeding 100 years (liable to a rate of 6%).  It is not possible to provide a breakdown between the classes of lease.  The table below shows the number of, and yield from, short term leases on residential property.  Data for 2012 and earlier years are not available.

Residential Short Term Lease Less   than or equal to 100 years

Year Number Duty
€m
2013 80 0.05
2014 140 0.07
2015 178 0.09
2016 238 0.15