Urban Development & Building Heights in Strategic Development Zones

Since the issue of the Urban Development and Building Heights Guidelines by the Minister for Housing, Planning and Local Government in December 2018 (the “Guidelines”), land owners and developers are understandably anxious to know how these guidelines will apply to proposed developments of land, the subject of planning applications. The below case note sets out when a planning authority is required to apply the Guidelines and offers a solution for developers of sites for residential use in SDZs where the Guidelines have not yet been implemented.

The High Court case of Spencer Place Development Limited –v- Dublin City Council [2019   IEHC 384] concerned the interpretation of the statutory Guidelines. Judgment was handed down by Justice Garrett Simons in May 2019 and dealt with the central issue in the case regarding the interaction between the Guidelines and existing planning schemes adopted in strategic development zones (SDZs).

The main contention in the case concerned Dublin City Council’s interpretation of a particular provision of the Guidelines known as specific planning policy requirement 3 (A) or “SPPR3 (A)” in the context of the consideration of planning applications already submitted to it. The Guidelines were issued by the Minister pursuant to s. 28 of the Planning & Development Act 2000 (“Section 28”). A planning authority is required, under Section 28 to have regard to ministerial guidelines and to comply with specific planning policy requirements. The question was whether SPPR 3(A) applied to plan schemes where it stated it applied to ‘development plans’ only. A Briefing Note on the Guidelines prepared by Dublin City Planning Officer stated that SPPR 3(A) did not apply to the development proposed for a planning scheme area.

BACKGROUND & LEGAL ISSUES

The plaintiff developer had two pending planning applications before Dublin City Council where the height of the development would exceed the maximum building height under the applicable planning scheme. The developer argued that the Guidelines permitted the planning authority to legally grant the planning permission despite the height restrictions of the North Lotts planning scheme. The court was asked to make a declaration firstly that the Briefing Note of 21 January 2019 was ultra vires or outside the powers of Dublin City Council Planning Authority and secondly, that the Council was obliged to apply SPPR 3 (A) of the Guidelines from the date of their publication in December 2018 and prior to undertaking any review of the North Lotts and Grand Canal Planning Scheme.

SPPR3 provides as follows:-

“It is a specific planning policy requirement that where;

(A)

  1. an applicant for planning permission sets out how a development proposal complies with the criteria above; and
  2. the assessment of the planning authority concurs, taking account of the wider strategic and national policy parameters set out in the National Planning Framework and these guidelines; then the planning authority may approve such development, even where specific objectives of the relevant development plan or local area plan may indicate otherwise.

(B)

In the case of an adopted planning scheme, the Development Agency in conjunction with the relevant planning authority (where different) shall,  upon the coming into force of these guidelines, undertake a review of the planning scheme, utilising the relevant mechanisms as set out in the Planning and Development Act 2000 (as amended) to ensure that the criteria above are fully reflected in the planning scheme. In particular, the Government policy that building heights be generally increased in appropriate urban locations shall be articulated in any amendment(s) to the planning scheme

(C)

In respect of planning schemes approved after the coming into force of these guidelines, these are not required to be reviewed.”

The defendant Dublin City Council argued that the judicial review proceedings brought by the developer were premature as while both planning application decisions were pending there was, therefore, no ‘decision’ or ‘act’ that could be the subject of judicial review and that the ordinary meaning must be given to the word ‘development plan’ in SPPR3(A) above. Arising from the application of the ‘ordinary meaning’ test for interpretation, and after having considered the full text of SPPR3, DCC argued that all the guidelines required it to do, was undertake a review of the planning scheme in accordance with SPPR3 (B): SPPR3 did not necessarily require a Planning Authority to amend the planning scheme to incorporate increased building heights, DCC argued.  The developer contended that the Briefing Note issued by the City Council Planning Officer regarding his interpretation of the building height guidelines was ‘justiciable’.

HIGH COURT DECISION

Justice Simons refused to grant Spencer Place Development Limited its three declarations and held in favour of DCC.

CONCLUSIONS FOR DEVELOPERS

This judgment is of interest to developers as it highlights the following:-

  1. Where an amendment to a planning scheme is pending, a planning application will be decided upon by reference to the existing planning scheme.
  2. The building height restrictions of an existing planning scheme within an SDZ cannot be circumvented by reference to the Guidelines.
  3. It clarifies that a planning authority is required to apply the Guidelines when assessing planning applications outside an SDZ. This means that one possible solution for a developer, when faced with a refusal of planning permission in an SDZ on grounds of building heights, might be to apply for permission for the same development under the fast-track Strategic Housing Development process. This is because the relevant legislation[1] does not differentiate between property located in a development plan, a local area plan or a planning scheme. However, the proposed development would need to consist of at least 100 residential units or 200 student units or a combination of both.
  4. Developers are also reminded that there is no right to appeal a decision to refuse planning permission in an SDZ on grounds that an extant planning scheme did not incorporate subsequently issued SPPRs.
  5. Whilst the subject of costs formed a separate judgment of Simons J. this case also demonstrates the requirement for a plaintiff developer to await a decision from the planning authority prior to issuing judicial review proceedings. It was held by Simons J. in a further judgment delivered in the costs application that the developer was unable to make the argument that both parties should bear their own costs pursuant to s. 50B of the Planning & Development Act 2000 by reason of the finding (amongst others) that the Briefing Note did not amount to a ‘decision’ capable of forming judicial review under that section. Simons J made an order directing the plaintiff to discharge DCC’s costs under the ordinary rule set out in Order 99 of the Rules of the Superior Courts that costs follow the event/ the winner at the absolute discretion of the Court.

The Irish Times has reported that the developer has appealed the substantive decision of Judge Simons to the Court of Appeal.  The appeal could also affect the costs order. In addition, DCC has proposed an amendment to the planning scheme which would increase building height restrictions in the North Lotts and Grand Canal SDZ. We will update this note as soon as the decision in the appeal has been published.

[1] See the definition of ‘Strategic Housing Development’ in s. 3 of the Planning and Development (Housing) and Residential Tenancies Act 2014

Whilst every effort has been made to ensure the accuracy of the information contained in this article, it has been provided for information purposes only and is not intended to constitute legal advice. Amorys Solicitors is a boutique commercial and private client law firm in Sandyford, Dublin 18, Ireland.
For further information and advice in relation to “Urban Development & Building Heights in Strategic Development Zones”, please contact Deirdre Farrell, partner, Amorys Solicitors deirdre@amoryssolicitors.com or Daragh Burke daragh@amoryssolicitors.com, telephone 01 213 5940 or your usual contact at Amorys.

Reducing Stamp Duty on a Business Asset Sale and Purchase in Ireland

Reducing Stamp Duty on a Business Asset Sale and Purchase in Ireland

It is generally understood that a buyer’s stamp duty liability will be 7.5%1 of the market value consideration paid for all assets passing under a Business Asset Sale and Purchase Agreement executed in Ireland2 but this is not necessarily the case. Below are a few mechanisms by which stamp duty on a business asset sale may be reduced.

  1. Any document executed in connection with the sale of intellectual property is exempt from stamp duty3. This is an important provision as it includes trademarks, copyright, patent and know-how and goodwill attaching to same4.
  2. It is possible, in some cases, to avoid stamp duty on the sale of plant and machinery, goods, wares and merchandise5. In order to do so, a buyer will need to agree in the Business Asset Sale and Purchase Agreement for ownership to these items to pass ‘by delivery’ and must not require a formal instrument evidencing the transfer of ownership on closing6.
  3. Similarly, it may be possible to avoid stamp duty on the acquisition of a debt (deemed consideration for stamp duty purposes), if the buyer agreed the debt would transfer ‘on delivery’. This could be effected by the production of a bearer instrument7 to the buyer on completion. Alternatively, the debt may be transferred by a novation agreement which, unlike an assignment8, would not classify the debt as a ‘conveyance on sale’ for stamp duty purposes9.
  4. The transfer of loan capital of a company or body corporate is exempt from stamp duty10 provided certain conditions are met. Broadly, the loan capital must not carry a right of conversion into shares of an Irish company, must not carry rights similar to rights attaching to shares (e.g. voting rights, right to profits etc), must not be issued for a price which is less than 90% of its nominal value and must not carry a right to interest which is related to movements in an index.
  5. Any instrument executed in connection with the sale of foreign property is exempt from stamp duty11. This can be extremely useful in circumstances where the seller is non-resident as movable property (including potentially the seller’s debts) could be deemed to be situated in the Seller’s country of residence, rather than in Ireland.
  6. Instruments executed in connection with the sale of residential property attract stamp duty of 1% of the market value of the consideration paid12. Residential property includes mobile and other holiday homes. This is a useful and valuable provision for buyers looking to acquire a residential property portfolio.
  7. Many instruments relating to the financial services industry such as debt-factoring agreements13, financial futures and contracts for difference are exempt from stamp duty14.
1 Stamp duty on non-residential property is typically charged as a ‘conveyance on sale’ at this rate – see Schedule 1, Stamp Duties Consolidation Act, 1999 (“SDCA ‘99”) as amended by section 57 of the Finance Act 2019.
2 The charge to stamp duty liability arises under s. 2 SDCA ’99 in relation to instruments executed “in Ireland”
4 Goodwill will be exempt only to the extent that it is directly attributable to the intellectual property in question. Where there is business goodwill and goodwill that is attributable to the intellectual property, the consideration must be apportioned between the two on a just and reasonable basis.
5 See section 31 Stamp Duties Consolidation Act, 1999 which provides that contracts for the sale of these movables are exempt from stamp duty
6 Circumstances of the transaction will dictate if this is advisable. Careful drafting of the relevant clause is required so as not to render the contract stamp-able as a ‘conveyance on sale’ under schedule 1, SDCA ’99.
7bearer instrument, or bearer bond, is a type of fixed-income security in which no ownership information is recorded and the security is issued in physical form to the purchaser. The holder is presumed to be the owner, and whoever is in possession of the physical bond is entitled to the coupon payments.
8 An assignment is considered a “conveyance or transfer on sale of any property other than stocks or marketable securities or a policy of insurance of a policy of life insurance” (commonly known as “Conveyance on Sale”) under schedule 1 SDCA ’99.
9 A novation agreement would involve the execution of a tripartite agreement by the original lender, the borrower and the party acquiring the debt. The suitability of this option will depend on the facts of the transaction, for example, it would not normally be an appropriate means of transferring a large portfolio of debts as it would require execution by each individual debtor
11 S.2 SDCA ’99 (charge to stamp duty) and see section 31 of the SDCA which provides for the exemption of contracts for sale of foreign property (as opposed to ‘conveyances’)
13 The exemption does not apply if the instruments relate to shares in Irish companies or land or buildings in Ireland s. 90 SDCA ‘99

An ‘asset sale’ has many advantages over a ‘share sale’ for both the buyer and the seller. For example, a seller may be in a position to crystallise a tax loss to offset a gain and a buyer has the potential to avoid uncrystallised gains in its accounts after completion.  Consequently, a purchaser should not summarily dismiss structuring a transaction as an ‘asset sale’ as the tax cost may be less than what it may seem at first instance.

Whilst every effort has been made to ensure the accuracy of the information contained in this article, it has been provided for information purposes only and is not intended to constitute legal advice. Amorys Solicitors is a boutique commercial and private client law firm in Sandyford, Dublin 18, Ireland.
For further information and advice in relation to “Reducing Stamp Duty on a Business Asset Sale and Purchase in Ireland”, please contact Deirdre Farrell, partner, Amorys Solicitors deirdre@amoryssolicitors.com, telephone 01 213 5940 or your usual contact at Amorys.

ARE YOU A NON RESIDENT THINKING OF BUYING PROPERTY IN IRELAND? – HERE IS WHAT YOU NEED TO KNOW

  1. There are no restrictions on foreign nationals buying property in Ireland. This means that both EU/ EEA and non-EU/ non-EEA nationals can purchase property here without limitation.
  2. Owning residential property in Ireland does not entitle the owner to a right of residence here. Residence and/ or the right to remain in Ireland are treated separately to property ownership and depend on each individual’s personal circumstances. For further information please see Irish National and Immigration Service.
  3. Similarly, owning commercial property here does not generally  entitle a non-EEA national to operate a business out of that property – permission from the Minister for Justice Equality and Law Reform is required. Conversely EU/ EEA nationals may operate a business and reside in Ireland without restriction by virtue of the general principles of EU law.   A company, once it has one director that is resident in Ireland, may operate a business out of that property.  The right of residence of each director and employee will be treated according to each individual’s circumstance however.
  4. It is important to note that a tenant of a non-resident Landlord in Ireland is obliged under current tax legislation (section 1041 Taxes Consolidation Act 1997) to withhold 20% of the annual rent and pay same to the Revenue unless that non-resident landlord has appointed a ‘Collection Agent’ to be assessed for the tax on the rent from that particular rental property. A collection agent is usually an estate agent, accountant or solicitor but could be any person who is resident in Ireland.  Once a collection agent has been appointed a tenant will be entitled to pay the full amount of the rent to the Irish resident agent.  Appointing a collection agent is relatively straight forward and can be effected by completing an Income Tax Registration Form for Collection Agents and submitting it to Revenue.  First the Landlord will need to register his/her tax or PPS number for income tax.  The Collection Agent will then need to apply to the Department of Social Protection for a separate Personal Public Service or tax Number which will be linked to the landlord’s tax number in Ireland.  Once a Collection Agent has been acknowledged by Revenue as such, the tenant can pay the rent to the Collection Agent without deduction of tax.
  5. Stamp duty at 6% of the market value of commercial property transactions must be paid by a purchaser. Stamp duty on a residential property transaction is payable at 1% of the market value up to €1m and at 2% on the value in excess of this amount. In both cases stamp duty must be paid by a purchaser within 30 days of completion of the transaction. In order to file a stamp duty return a PPS or tax Number will be required which will take some time (currently up to 8 weeks) to issue from the Department of Social Protection if a purchaser does not have one already which could potentially delay completion of the transaction.  Individuals or companies who have never been resident or carried on business in Ireland are unlikely to have a PPS or a Tax Number and may therefore be subject to this delay.
  6. The conveyancing process in Ireland can generally be divided into three stages: negotiation stage (where solicitors are generally not involved); pre-contract stage (solicitors are involved) ; and completion (Solicitors are involved). The negotiation stage usually involves private individuals and/or their estate agents or representatives negotiating the sales price and “heads of terms”. In Ireland, the vast majority of the legal work is carried out by solicitors at “pre-contract stage” so that once a contract has been signed by both parties, it is usually possible to complete soon after that.  The length of time it takes to complete a purchase will however depend on each transaction and in particular whether the purchaser is buying with cash only or with both cash and the benefit of a mortgage.  All going well, it should be possible to complete the conveyancing transaction within 4 weeks of exchange of contracts.
  7. An annual charge (called “local property tax”) of up to 0.18% of the market value of a residential property in Ireland up to a value of €1m, and up to 0.23% on the balance of the MV over and above €1m must be paid to the Revenue on or before 10th January each year which is something that a prospective investor will need to bear in mind prior to purchasing on a ‘buy to let’ basis. The percentage rate may fluctuate.  Further details of the local property tax charge are available here.
  8. Rates are payable on commercial property to the local authority for the area in which the property is situated. The amount payable will depend on the size of the property and other factors.
  9. Service charges may be payable to a management company where the property, residential or commercial, is located within a serviced estate.
  10. Ireland has signed comprehensive double taxation agreements with 73 countries which generally speaking result in a non-resident landlord paying no more tax than they would in their own country of residence.

A non-resident individual or business looking to purchase property in Ireland can benefit from experienced property solicitors in a myriad of ways: from identifying the need to apply for a PPS or Tax Number at an early stage to drafting a Lease after the transaction has completed and advising him/her of the potential tax liabilities and obligations in respect of any rental income.  Experienced solicitors assist with ensuring a transaction proceeds quickly and seamlessly.

Leading Dublin solicitors which provides high quality legal advice

Get Your Guide to Purchasing Residential Property

Amorys solicitors is a boutique private client and commercial law firm experienced in all aspects of a property transaction. For further information and advice in relation to “Are You A Non Resident Thinking Of Buying Property In Ireland?”, please contact Deirdre Farrell, partner, Amorys Solicitors deirdre@amoryssolicitors.com, telephone 01 213 5940 or your usual contact at Amorys

Whilst every effort has been made to ensure the accuracy of the information contained in this article, it has been provided for information purposes only and is not intended to constitute legal advice. Specific advice should be sought in each situation.

Sharon Scally, Chairman of Sandyford Business Improvement District comments on Proposed new Tech Giant Tenant in Sandyford

Google is set to expand its Irish operations further with a planned move to offices in Sandyford Business District (SBD) in south Co Dublin. Google will be neighbours with other multi-national tech companies such as Microsoft, Vodafone, Salesforce and indigenous rising star Cubic Telecom.

SBD has 1,000 companies and a highly-skilled and talented workforce of 25,000 and is a leading location for Pharma and FinTech HQ’s including Bank of America Merrill Lynch, DCC, RBS and ICON. AIB recently announced its acquisition of new SMART offices in Central Park which will be a Centre of Excellence for Digital Innovation for 1,600 of its personnel.

Sharon Scally, Chairperson of SBD, commented ‘The Sandyford Business District is recognised as Ireland’s premier business district and Google’s decision to open it’s newest offices is testimony to the availability of highly qualified talent, award-winning infrastructure and extensive lifestyle offerings in the district. We look forward to welcoming Google and integrating them with the established networking services of the SBD’.

Also featured  here and http://www.sandyford.ie/news-events/news/google-secures-new-offices-in-sandyford-business-district

Whilst every effort has been made to ensure the accuracy of the information contained in this article, it has been provided for information purposes only and is not intended to constitute legal advice. Amorys Solicitors is a boutique commercial and private client law firm in Sandyford, Dublin 18, Ireland.
For further information and advice in relation to “Sharon Scally, Chairman of Sandyford Business Improvement District comments on Proposed new Tech Giant Tenant in Sandyford”, please contact Deirdre Farrell, partner, Amorys Solicitors deirdre@amoryssolicitors.com, telephone 01 213 5940 or your usual contact at Amorys.

Commercial Leases – Essential Questions For A Prospective Tenant (Infographic)

A commercial lease can be an extremely onerous contract and expert legal advice is essential from the negotiation stage through to the point of signing the original lease and related documents.

We have highlighted below in the form of strategic questions some of the major issues upon which we advise our commercial clients.  These issues are of course of equal and reciprocal importance to a landlord or tenant property developer. Check the infographic below to learn more about the questions you need to ask a prospective tenant.

COMMERCIAL LEASES – ESSENTIAL QUESTIONS FOR A PROSPECTIVE TENANT INFO-GRAPHIC

Whilst every effort has been made to ensure the accuracy of the information contained in this article, it has been provided for information purposes only and is not intended to constitute legal advice. Amorys Solicitors is a boutique commercial and private client law firm in Sandyford, Dublin 18, Ireland.
For further information and advice in relation to “Commercial Leases – Essential Questions For A Prospective Tenant”, please contact Deirdre Farrell, partner, Amorys Solicitors deirdre@amoryssolicitors.com, telephone 01 213 5940 or your usual contact at Amorys.

Tax Considerations when Buying a Business

The tax structure of a business acquisition can be the deciding factor when assessing the merits of buying a business.

Broadly speaking business purchase transactions take the form of either a share or an asset purchase and both differ widely in terms of what tax considerations come in to play.

A Buyer could also buy shares from a ‘hived-down’ new company to which the Seller has transferred only the assets a Buyer would like to buy.  This structure is a combination of both a share sale and an asset sale but from the Buyer’s perspective it would be a share purchase.

Each buy-out structure has different tax implications for a Buyer and Seller.

A Seller may want a business sale to take place by way of a share sale so that he receives funds directly and is only chargeable to capital gains tax on the difference between the sales price of the shares and their base cost.  A Buyer may wish to purchase assets of a business only so that she does not inherit latent gains on assets (see below) or potential outstanding tax liabilities of a the target company.  Below is a ‘bird’s eye view’ of the tax considerations arising for a buyer in a share and separately, an asset, purchase transaction.  Our next article will deal with the tax aspects from the point of view of a seller.

What tax considerations do I need to be aware of if I am buying shares in a target company?

  1. Stamp duty: Stamp duty costs in such a transaction are generally lower as shares are subject to 1% stamp duty on their market value whilst assets are subject to a rate of up to 2% in some cases.  However, in cases of a share sale there is less flexibility to reduce the stamp duty, e.g. by arranging for certain assets to transfer by delivery.
  2. Exposure for hidden tax liabilities of a target company:
    This is generally a principal concern for a Buyer when buying a company.  Logically, a Buyer does not want to be liable for tax liabilities of a company that arose during a period for which s/he was not in control.   The longer the target company has been in existence, the greater the risk that there are hidden or undocumented tax liabilities for which the Company may be found liable at a later stage.
    The main objective for a Buyer is to ensure that a target company is ‘clear’ from any hidden taxation liabilities arising from for example, failure to file returns and pay penalties arising therefrom, failure to correctly account for value added tax (VAT), incorrectly claiming reliefs, etc.  Researching into these areas is called ‘due diligence’ and is a central component to any business acquisition.  Tax due diligence will help establish the purchase price and the type of tax warranties and indemnities to be included in the share sale agreement amongst other things.
    The advantage from a tax perspective of using the ‘hived down’ structure referred to above is that the new ‘hived down’ company would have a short tax history which would mean less risk for a Buyer for hidden tax liabilities.
  3. Exposure for Latent gains on the sale of company assets in the future: In a share purchase transaction, the assets of the target company retain their original cost price.  This means that if/when the Buyer (through the target company) sells its assets it will have to pay corporation or capital gains tax on the difference between the sale price of that asset and the original cost of purchase (if any).  If the original cost of purchase of that asset is less than its market value on the date of acquisition of the target company, the Buyer will be liable to pay tax on that ‘latent’ gain if it subsequently sells those assets for greater than or equal to the market value on the date it acquired the company.  Latent gains could therefore reduce the value of a Buyer’s interest in the target company if they are not considered at the outset of a transaction.

What tax considerations do I need to be aware of if I am buying assets from a target company?

  1. No exposure for latent gains on the sale of target company assets  : In an asset purchase transaction, a Buyer acquires the assets at their market value at the date of sale and avoids potential exposure to latent gains referred to above.  A Seller would more than likely prefer a share sale to avoid having to pay capital gains tax, having regard to the fact that its members would be subject to further tax (income or dividend withholding tax) when extracting the sale proceeds from the selling company.
  2. No exposure for hidden tax liabilities : In an asset buyout, hidden tax liabilities can be left behind in the target company without requiring the Buyer to rely on detailed warranties which may prove unrecoverable from the Seller at a later time (because of its liquidation or exit from Ireland).
  3. Value Added Tax liability on assets purchased:  A Buyer may need to pay value added tax at 13.5% on the value of the assets – for example commercial property which has been developed in the past two years or remains in the ‘VAT Net’.  If the Buyer is not registered for VAT or cannot reclaim VAT paid, it remains an additional cost of the transaction.  In many situations it is possible for a Buyer to pay VAT on the purchase of an asset and reclaim it on the same day resulting in a cash neutral position but each Buyer every situation is unique and detailed advices are required in this regard.
  4. Tax advantages of purchasing premises directly in the name of the Buyer: There may be tax advantages to a Buyer purchasing real property of a business directly and for him/her/them to grant a commercial lease to the target company. A buyer should enquire with their advisers as to the tax benefits of doing so before executing any Share Sale and Purchase Agreement.

As you will see from our next article there are many competing objectives from a tax perspective for both a buyer and a seller in a business acquisition.

There are many ways in which Amorys Solicitors can be of assistance to a prospective Buyer in a business purchase transaction.  We advise on all aspects of merger and acquisition transactions for Small to Medium Enterprises (SMEs) including advice in relation to the form and structure of an acquisition or buy-out, carrying out due diligence and drafting corporate contracts including Share Sale and Purchase, and separately, Asset Sale and Purchase Agreements. If you would like further information in relation to any of the above please contact Deirdre Farrell, partner, Amorys Solicitors deirdre@amoryssolicitors.com, telephone 01 213 5940 or your usual contact at Amorys.

Whilst every effort has been made to ensure the accuracy of the information contained in this article, it has been provided for information purposes only and is not intended to constitute legal advice. Amorys Solicitors is a boutique commercial and private client law firm in Sandyford, Dublin 18, Ireland.

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