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New Build: Seperate Land & House Contracts

  • 17-07-2019 9:49am
    #1
    Bluefoam
    Registered Users, Registered Users 2 Posts: 7,753 ✭✭✭


    Is this common practice now on new build properties... where the value of the contract is split into puchase of the plot & purchase of the house?

    Whats would be the reason? Creative accounting on behalf of the builder? A way around stamp duty?


Comments

  • #2
    charlietheminxx
    Registered Users, Registered Users 2 Posts: 2,579 ✭✭✭charlietheminxx


    I'm not sure what the reason behind them is, but I know that's the type of contract I have for my new build, our solicitor mentioned they were becoming more common.


  • #3
    Victor
    Registered Users, Registered Users 2 Posts: 78,574 ✭✭✭✭Victor


    Phileas Frog wrote: »
    Perfectly normal. Stamp Duty is only payable on the dwelling part
    Revenue wised up to to this and stamp duty is due on the full amount.


  • #4
    Claw Hammer
    Registered Users, Registered Users 2 Posts: 6,541 ✭✭✭Claw Hammer


    What about VAT?


  • #5
    Dolbhad
    Registered Users, Registered Users 2 Posts: 782 ✭✭✭Dolbhad


    Our new build we looked at had contract for sale and building agreement. Letter from solicitor said contact for sale is buying the site and building agreement is your employing the builder to buy the house. Some builders do a combined building agreement/contract for sale. It seems there are agreed general conditions between law society and building federation that apply separately to contract for sale and building agreement. So think that’s why it’s done like that as opposed to a second hand house where you see what you get.

    Stamp duty is payable on both the amount in contract for sale and building agreement


  • #6
    Claw Hammer
    Registered Users, Registered Users 2 Posts: 6,541 ✭✭✭Claw Hammer


    Dolbhad wrote: »
    Our new build we looked at had contract for sale and building agreement. Letter from solicitor said contact for sale is buying the site and building agreement is your employing the builder to buy the house. Some builders do a combined building agreement/contract for sale. It seems there are agreed general conditions between law society and building federation that apply separately to contract for sale and building agreement. So think that’s why it’s done like that as opposed to a second hand house where you see what you get.

    Stamp duty is payable on both the amount in contract for sale and building agreement

    Yes, but what about VAT on the land and the new build?


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  • #7
    Phileas Frog
    Closed Accounts Posts: 946 ✭✭✭Phileas Frog


    Claw Hammer wrote: »
    Yes, but what about VAT on the land and the new build?

    Liable for both. Stamp is on the ex VAT price though, for a new build


  • #8
    Claw Hammer
    Registered Users, Registered Users 2 Posts: 6,541 ✭✭✭Claw Hammer


    Phileas Frog wrote: »
    Liable for both. Stamp is on the ex VAT price though, for a new build

    How can you be liable to pay VAT on the purchase of land?


  • #9
    Victor
    Registered Users, Registered Users 2 Posts: 78,574 ✭✭✭✭Victor


    Claw Hammer wrote: »
    How can you be liable to pay VAT on the purchase of land?
    If this wasn't the case, people would try to game the system.

    VAT is payable on all improvements to land.


  • #10
    notharrypotter
    Closed Accounts Posts: 1,112 ✭✭✭notharrypotter


    Bluefoam wrote: »
    Is this common practice now on new build properties... where the value of the contract is split into puchase of the plot & purchase of the house?

    Whats would be the reason? Creative accounting on behalf of the builder? A way around stamp duty?

    If something was to happen to the built you would still own the site.


  • #11
    myshirt
    Registered Users, Registered Users 2 Posts: 5,245 ✭✭✭myshirt


    The fact that there is a separate contract for the land and a separate contract for building is actually to your benefit op, believe it or not.

    You are over worrying. This is what you pay the solicitor for. You'll be grand.


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  • #12
    Dolbhad
    Registered Users, Registered Users 2 Posts: 782 ✭✭✭Dolbhad


    You pay VAT on both. There will be a clause that says price is inclusive of VAT. But you pay stamp duty on the VAT exclusive price. Contract for sale building agreement are in an agreed format between law society and building federation so there isn’t anything to worry about.


  • #13
    Claw Hammer
    Registered Users, Registered Users 2 Posts: 6,541 ✭✭✭Claw Hammer


    Victor wrote: »
    If this wasn't the case, people would try to game the system.

    VAT is payable on all improvements to land.

    What improvement has taken place on the land at the time of purchase?


  • #14
    Victor
    Registered Users, Registered Users 2 Posts: 78,574 ✭✭✭✭Victor


    Claw Hammer wrote: »
    What improvement has taken place on the land at the time of purchase?
    Often there will have been site works - drainage, roads, etc., if not the partial / complete construction of the property.


  • #15
    [Deleted User]
    Posts: 24,714 ✭✭✭✭ [Deleted User]


    There is no vat liability on the purchase of land.


  • #16
    Victor
    Registered Users, Registered Users 2 Posts: 78,574 ✭✭✭✭Victor


    Christian Stocky Duck wrote: »
    There is no vat liability on the purchase of land.

    Yes, but VAT is payable on all improvements to land.


  • #17
    Phileas Frog
    Closed Accounts Posts: 946 ✭✭✭Phileas Frog


    Christian Stocky Duck wrote: »
    There is no vat liability on the purchase of land.

    Yes there is, when there's a house built on it


  • #18
    Claw Hammer
    Registered Users, Registered Users 2 Posts: 6,541 ✭✭✭Claw Hammer


    Phileas Frog wrote: »
    Yes there is, when there's a house built on it

    In this case the land is being sold before there is a house built on it.


  • #19
    Phileas Frog
    Closed Accounts Posts: 946 ✭✭✭Phileas Frog


    Claw Hammer wrote: »
    In this case the land is being sold before there is a house built on it.

    Doesn't matter, if there's an intention to develop it then VAT is liable.

    https://www.revenue.ie/en/vat/vat-on-property-and-construction/vat-and-the-supply-of-property/is-a-supply-of-property-taxable.aspx


  • #20
    [Deleted User]
    Posts: 24,714 ✭✭✭✭ [Deleted User]


    Phileas Frog wrote: »
    Doesn't matter, if there's an intention to develop it then VAT is liable.

    https://www.revenue.ie/en/vat/vat-on-property-and-construction/vat-and-the-supply-of-property/is-a-supply-of-property-taxable.aspx

    It’s not correct to say that vat is liable if there is an intention to develop. In certain (rather complicated and long winded) scenarios it appears it may be but in most instances it’s not.


  • #21
    Claw Hammer
    Registered Users, Registered Users 2 Posts: 6,541 ✭✭✭Claw Hammer


    Phileas Frog wrote: »
    Doesn't matter, if there's an intention to develop it then VAT is liable.

    https://www.revenue.ie/en/vat/vat-on-property-and-construction/vat-and-the-supply-of-property/is-a-supply-of-property-taxable.aspx

    Where on that link dos it say that?
    In order for the land to be liable for VAT up some work must have been carried out to it prior to the sale which it is intended will lead to development.


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