7th December 2007

Reform of the Charge to Stamp Duty on Residential Property
The current Stamp Duty system applicable to residential property is being reformed. A simplified system, incorporating an exemption of €125,000 with 2 progressive rates instead of the existing 6 rate bands, is being introduced with immediate effect.

Transactions not exceeding the €125,000 exemption level will not be liable to Stamp Duty. For amounts above this €125,000 exemption level, but not exceeding €1 million, Stamp Duty will be charged at 7% on the excess over €125,000. Where the property exceeds €1 million, the part in excess of €1 million will be charged at 9% with the remainder between €125,000 and €1 million subject to a 7% charge. In addition, properties with a value in excess of €125,000 but not exceeding €127,000 will not be liable for stamp duty.

This change will take effect in respect of instruments which are required to be presented to the Revenue Commissioners for stamping no later than 5 December 2007. Instruments which are executed in the 30 days prior to 5 December 2007 will therefore benefit from this change. Current exemptions in relation to first time buyers and buyers of new homes will continue to apply.

More information on this reform is contained in Annex G. This measure will cost €190 million in a full year with a minor cost in 2007.

Claw-back of Relief for First-time Purchasers and other Owner-Occupiers
An exemption from Stamp Duty is generally available for first-time owner-occupying purchasers of new or second-hand dwelling houses or apartments. There is also an exemption available for other owner-occupying purchasers of new dwelling houses or apartments under 125m2. In addition, partial relief is also available to owner-occupying purchasers of new dwelling houses or apartments over 125m2. These exemptions/reliefs are clawed-back where the purchaser rents out the dwelling house or apartment, other than under rent-a-room arrangements, within 5 years of the date of the deed of transfer giving effect to the purchase. This claw-back period is being reduced for all three reliefs from 5 to 2 years for deeds of transfer executed on, or after, 5 December 2007. For deeds of transfer executed before 5 December 2007, to the extent that a dwelling house or apartment is rented out on, or after, 5 December 2007, it will not involve a claw-back of relief where this happens in the third, fourth or fifth year of ownership. This measure is estimated to cost €4 million in 2008 and in a full year.

Rent-a-Room Scheme
The limit of the exemption from income tax which applies to rent received, where a person rents out a room or rooms in his or her principal private residence, is to be increased from €7,620 to €10,000. This measure is estimated to cost €0.6 million in 2008 and €0.8 million in a full year.

Mortgage Interest Relief
The current annual ceiling on the amount of interest that can be allowed on a mortgage is being increased with effect from 1 January 2008 for first-time buyers from €8,000/€16,000 single/married to €10,000/€20,000 single/married. The additional relief will be available for the first seven years for which there is an entitlement to mortgage interest relief. This measure is estimated to cost €20 million in 2008 and in a full year.*

Allowance for Rent Paid by Certain Tenants
The maximum level of rent paid for private rented accommodation on which tax relief can be claimed, at the standard rate of tax, is being increased. For those aged under 55 years of age, it is being increased from €1,800 to €2,000 per annum for a single person and from €3,600 to €4,000 per annum for widowed and married persons. This equates to a tax credit of €400 per annum for single persons and €800 for widowed and married persons under 55 years of age. For those aged 55 years and over, the maximum level of rent paid on which tax relief can be claimed is being increased from €3,600 to €4,000 per annum for a single person and from €7,200 to €8,000 per annum for widowed and married persons. This equates to a tax credit of €800 per annum for a single person and €1,600 per annum for widowed and married persons over 55 years of age. This measure is estimated to cost €7.0 million in 2008 and €9.7 million in a full year.

Review of VAT on Property Transactions
A review of the current system of applying VAT on property transactions has been carried out. Provision will be made in the Finance Bill for the introduction of a new system for applying VAT to property transactions. The changes are designed to simplify the rules for VAT on property, while ensuring a more equitable treatment for taxpayers. The new rules, which are outlined in Annex E, will apply to both commercial and residential property supplied in the course of business. The VAT charge on sales of residential property is unchanged. The new system will take effect from 1 July 2008. It is estimated that this measure will be Exchequer neutral.

Reverse charge mechanism in the Construction Sector
A reverse charge mechanism for VAT on supplies made by a subcontractor to a principal contractor in the construction sector is being introduced with effect from 1 September 2008. This is a simplification measure. This measure will be the subject of consultation with the construction sector and the details will be outlined in the Finance Bill. This measure will result in an estimated once-off cash flow yield of €50 million in 2008, but will not increase the overall tax bill of the taxpayers concerned.

Further Details: www.finance.gov.ie