The new Local Property Tax is effective for all residential properties in Ireland in 2013.
We set out below a short summary of some of the main issues likely to arise in practice and indeed the consequences of not adhering to the strict deadlines set out by Revenue in relation to paying and filing the tax as it falls due.
LPT is a tax that will arise on every residential property at a rate of 0.18% on valuations up to €1 million with a higher rate of 0.25% on the amount by which a property exceeds this value. A full charge will be imposed in 2014 and subsequent years but this is reduced by 50% in 2013.
While Revenue will in many cases have already written to every household with an indication of value by the end of March 2013 this is a tax that will be based on a property owners OWN valuation on the principles of self assessment. However, to ease the burden on taxpayers it should be noted that:
- The tax will be levied on the mid point of a €50,000 rate band. So if for example a property is worth between €200,000 and €250,000, the liability will be 0.18% of €225,000 which will amount to €202 in 2013 and €405 in 2014. This allows for a certain margin of error which will greatly assist in most cases in arriving at a reasonably acceptable valuation.
- An interactive Revenue website has been established which will allow taxpayers to obtain indicative valuations of similar properties in their own locality.
- The valuation date for properties will be 1 May 2013 and will remain valid up to 2016.
- Where a valuation is understated and Revenue successfully argue that a higher valuation is more appropriate, interest may apply on any underpayment. However where a property is sold for LESS than the taxpayers own valuation a refund of LPT will not be made.
Every person liable for LPT will need to file a Return by 7 May – extended to 28 May when done electronically – and the tax will be due on 1 July. This is extended to 21 July when paid electronically and it should be noted that provision for payment by installments is also allowed.
Person liable to pay the LPT
Generally this will be the property owner and in the case of joint owners a decision will need to be made between them as to who actually files the Return and pays the tax.
It should be noted that landlords will pay the LPT on rental property unless there is a lease in place for more than 20 years in which case the tenant will be liable to make the payment. In death cases the liability will rest with the Personal Representatives of the deceased owner.
These are quite limited and will include
1. Guesthouses and B & B accommodation which are fully within the charge to commercial rates.
2. New and previously unused properties that are acquired from a builder or developer in the years 2013 to 2016 inclusive will be exempt until the end of 2016.
3. Any second hand house occupied as a sole or main residence by a first time buyer who acquires it at any time in 2013 will also be exempt until 2016.
4. Certain properties in so called “Ghost” Estates where they lack certain basic services – in this regard it should be noted that exemption will only apply in quite limited cases and then only where the Estate in question is included on a specified Local Authority or Department of Environment approved list.
5. Nursing homes and residential properties owned by charities
6. Certain properties that are effected by Pyrite
The consequences of not paying LPT or filing a Return
As indicated at the outset, it is the Revenue Commissioners rather than Local Authorities that will be responsible for collecting the tax and generally ensuring compliance with this legislation. Business owners will already be well aware from their day to day dealings with Revenue as to the penalties that can generally arise from non-compliance with various tax deadlines.
However, the Local property tax will for the first time bring many PAYE taxpayers into direct contact with Revenue and they would be well advised to bear in mind that a Zero tolerance approach to late or non-payment of tax and filing of Returns is likely to be adopted.
This will include issuing of demands, enforcement by the Sheriff and in a last resort placing a charge on the property.
For self-assessed tax payers the consequences for non-compliance can be particularly severe and include:
• Refusal by Revenue to issue a general tax clearance certificate
• A possible surcharge included on an Income Tax assessment even where that Income Tax Return is filed on time
It is expected that for these reasons, the general high level of advance publicity surrounding this tax and the range of payment options available that a reasonably high level of compliance can be expected.