Investors to gain from stamp duty change

The Minister for Finance is set to extend the deadline by which property investors can qualify for pre-Bacon III stamp-duty relief in the coming Finance Bill.

The Bill, which will be published by mid-February, will implement the changes announced in the Budget and target other areas such as share options and gain sharing.

In a letter to the Irish Home Builders' Association, Mr McCreevy said he was prepared to include a provision in the Finance Bill 2001 to extend the deadline for receiving stamp duty relief.

Under current provisions, investors must have completed conveyances by January 31st to qualify to pay stamp duty at the lower rates which existed before June 15th.

The Minister will now extend the deadline to July 31st, 2001, for these properties where conveyances were entered into before June 15th last.

The home builders had lobbied for the change on the basis the labour shortages and poor weather at this time of year meant many projects would not be completed on time.

As a result, investors would have ended up paying the higher 9 per cent stamp duty despite having entered into the contract to buy the property before June 15th.

The property industry has also been lobbying for the abolition of the higher stamp duty, pointing to the difficulty many are finding in sourcing affordable rented accommodation. There is evidence that many firms are finding it increasingly difficult to hire people from abroad because of the high cost of housing and rented accommodation. However, the Minister is thought to be reluctant to abolish or change a measure which has only just been introduced. There are also fears that any change in the Bacon III provisions, while boosting supply of rented property, could further fuel overall house prices. That is a result Mr McCreevy would be keen to avoid.

Other likely changes in the Bill include changing the tax treatment on share option schemes, a move for which technology firms in particular have lobbied heavily. These are likely to become eligible for taxation at the same rate as capital gains, or 20 per cent, rather than the current marginal rate of income tax at 42 per cent.

Proposals on making gain sharing more tax efficient are also expected, although these are more difficult technically and no firm proposals have yet been decided.

The Minister is also coming under pressure to change the increased PRSI provision for employers, although he is very unlikely to do so. However, the campaign will be maintained during the run-up to the next Budget in October. Because of the short nine-month tax year in 2001 the elimination of the PRSI ceiling affects only those employing people on more than £52,000. If the rate is not reduced it would have a far bigger impact on companies in 2002.

However, there may be changes in the Social Welfare Bill to increase the threshold where the higher rate of employers' PRSI becomes payable.

The Minister is also looking at the possibility of reducing or in some circumstances eliminating benefit in kind on childcare costs met by employers. This will probably be fairly restrictive and will not encompass cash payments.