September 17 2015
This could cause a problem for any trust if the sale or purchase is due to settle after that date. Even if settlement is due before 1 October, there is a risk unexpected delays could mean that settlement is not completed until after that date and the trustees could be caught by the new rules. Trustees need to be prepared and get an IRD number well in advance. This could cause a problem for any trust if the sale or purchase is due to settle after that date, or if there is a risk that settlement might be delayed or postponed until after 1 October 2015. Trustees need to be prepared and get an IRD number well in advance.
The proposed changes are to the Land Transfer Act under the Bill which will apply from 1 October 2015 ¹although the Bill is still being considered by Parliament at present. The Bill deals with the method and rules for the collection information. There may be changes before the legislation is finally passed. A second Bill deals with the proposed tax rule². At the time of writing, this is still going through Parliament and there is not much time left for the legislation to be in place.
Although your trust should be exempt from paying capital gains tax on a sale (if it has owned the property from more than two years, or if it is your main home) we still need to complete a tax statement to report the sale or purchase transaction to the IRD before we can sign and certify so that the transaction and settlement to can be completed. Therefore, if your trust buys or sells a property with a settlement date after 1 October 2015 your trust must have an IRD number.
It doesn’t matter when the agreement was signed, (for example if your trust bought an apartment off the plans two years ago, or a section where the subdivision has taken a couple of years for the title issue) but if settlement occurs on or after 1 October 2015 you need to provide an IRD number.
If someone is buying or selling as trustee, ‘the information must relate to the trustee in that capacity.’ In other words, it must be the IRD number for the actual trust. It could take the IRD up to 10 working days to issue an IRD number for your trust once it receives an application.
Where two or more trusts are buying the property in a partnership the IRD number and information must relate to the partnership. This may require individual trusts to obtain an IRD number and then these trusts applying for a trusts partnership IRD number. Inland Revenue, from recent experience, may take up to 20 working days to issue an IRD number in these circumstances. You therefore need to be prepared before signing any Agreements for Sale or Purchase agreements.
If you would like us to obtain the IRD number for you, please contact our trust lawyers
¹Taxation (Land Information and Offshore Persons Information) Bill.
²Taxation (Bright-Line Test for Residential Land) Bill.