What is LPT and what properties does it apply to?
Arising from Budget 2013 home owners are liable to an annual tax on Irish residential properties from 1 July 2013. A residential property means any building or structure which is in use as, or is suitable for use as, a dwelling. It includes any shed, outhouse, garage or other building or structure and any yard, garden or other land, appurtenant to or usually enjoyed with that building. However, any yard, garden or other land that exceeds one acre shall not be taken into account for the purposes of this definition.
Who is liable?
In most cases the property owner will be liable for LPT. However, there may be more complex situations, and Revenue have provided guidance for establishing who the liable person is in these circumstances. Revenue guidance states that the LPT is payable by the following persons:
- Landlords where the property is rented under a short-term lease (for less than 20 years).
- Local authorities or social housing organisations that own and provide social housing.
- Lessees who hold long-term leases of residential property (for 20 years or more).
- Holders of a life-interest in a residential property.
- Persons with a long-term right of residence (for life or for 20 years or more) that entitles them to exclude any other person from the property.
- Personal representatives of a deceased owner (e.g. executor/administrator of an estate).
Where, for whatever reason, there is no owner registered for the property or it does not fall within any of the above categories, then the liable person for LPT will be the person who occupies the property on a rent-free basis and without challenge to their occupation.
What is LPT based on?
Simply put, the Local Property Tax is based on the market value of the property. Market value refers to the amount for which the property would be expected to achieve if sold on the open market on May 1st. The market value is usually calculated on the basis of similar transactions and other comparable evidence and will factor in the fundamentals such as property size, location, features, access to amenities, transport links etc.
However, it should be noted that according to the Act, LPT is a tax payable on the chargeable value of the residential property by the owner of the property. In most cases, the chargeable value will be the same as the market value of the property i.e. the value that the property could be sold for on May 1st 2013. The definition presumes good title with no restrictions and that there is full access to the property. However, there may be cases when the chargeable value and the market value will differ. For example, there may be a situation whereby a parent has transferred their property to a son or daughter but retained a ‘right of residency’. In this case, it would affect the ability of the property to be sold on the open market however the property tax liability will be determined based on the ‘chargeable value’ of the property. i.e ignoring the restriction on title caused by the right of residency.
As mentioned, in the vast majority of cases, the chargeable value will be the same as the market value.
How do I determine the value of my property?
The basis of the LPT is self-assessment. This means that it is the responsibility of the individual homeowner to determine the value of their property and select the appropriate tax band (see below).
The LPT Return letters received by homeowners contain an estimate of the LPT liability. Please note that this does not reflect an accurate valuation of the property and is simply an average estimate. It is the homeowner’s responsibility to ensure that they correctly assess the value of their property. The valuation that you declare in 2013 will remain the same until the end of 2016. It is therefore important that you provide an accurate valuation to Revenue.
How do I calculate my LPT liability?
Once you have determined an approximate value for your property, you can then select the appropriate tax band using the calculator on the Revenue website or the table below:
What properties are exempt from LPT
The following properties are exempt from LPT:
- New and unused properties purchased from a builder or developer between 1 January 2013 and 31 October 2016 are exempt until the end of 2016.
- Properties purchased by a first time buyer between 1 January 2013 and 31 December 2013 are exempt until the end of 2016 if used as the person’s sole or main residence.
- Properties constructed and owned by a builder or developer that remain unsold and that have not yet been used as a residence.
- Properties in unfinished housing estates, specified by the Minister for the Environment.
- Properties that are certified as having a significant level of pyrite damage in accordance with regulations to be published by the Department of the Environment, Community and Local Government.
- Properties owned by a charity or a public body and used to provide “special needs” accommodation and support to people who have a particular need in addition to a general housing need to enable them to live in the community e.g. sheltered housing for the elderly and the disabled.
- Registered Nursing Homes.
- A property previously occupied by a person as his or her sole or main residence that has been vacated by the person for 12 months or more due to long term mental or physical infirmity. A property may also be exempt if the vacated period is less than 12 months and the person’s doctor is satisfied that he or she is unlikely to return to the property. In both cases, the exemption only applies when the property is not occupied by any other person.
- Properties purchased or adapted for use as a sole or main residence of a severely incapacitated individual who has received an award from the Personal Injuries Assessment Board or a Court or who is a beneficiary under a trust established for the purpose. Further details are available at www.revenue.ie.
- Mobile homes, vehicles or vessels.
- Properties fully subject to commercial rates.
- Diplomatic properties.
- Properties used by charitable bodies as residential accommodation in connection with recreational activities that are an integral part of the body’s charitable purpose, e.g. guiding and scouting activities.
How do I qualify for a deferral of LPT?
In certain circumstances, a liable person may opt to defer payment of LPT. The following are some important points to note in relation to deferrals:
- A deferral is not an exemption.
- Interest of about 4% per annum applies to deferred LPT.
- A claim for deferral must be made on the LPT return and the return must be filed with Revenue.
- The deferred LPT remains a charge on the property and will have to be paid to Revenue when the property is sold or transferred.
There are four separate categories of deferral available and full details of the conditions and procedures for each of these options are available on the Revenue website:
- Income Threshold
- Personal Representative of a Deceased Person
- Personal Insolvency
- Hardship Grounds
A person whose income is below certain thresholds may opt for deferral under the Income Threshold category. The income thresholds may be increased where the person has an outstanding mortgage on which they are making interest payments. It is important to note that only owner-occupiers may opt for this category of deferral. This option is not available in respect of second homes or rental properties. Deferral under this category is granted on a self-assessment basis. This means that the person makes a claim for deferral on their return and does not have to go through an approval process.
Revenue approval is required for claims for deferral under any of the other categories i.e. Personal Representative of a Deceased Person, Personal Insolvency and Hardship Grounds. Unlike the Income Threshold category, these deferrals are not restricted to owner-occupiers. Those claiming deferral under any of these 3 categories must also file an additional LPT2 Form (available on the Revenue website), as well as the normal LPT1 Return, and provide the information required on the Form.
What happens if I don’t file my LPT return or pay my LPT liability?
Revenue have considerable powers to ensure that taxpayers comply fully with their LPT obligations.
If the LPT Return is not submitted, Revenue will pursue the collection of their Estimate, using a range of options, including the following:
- Deduction from 1 July 2013 from employment income, pension income or certain payments from the Department of Social Protection or the Department of Agriculture, Food and the Marine.
- Deduction from bank accounts.
- Referral of the debt to a Sheriff or a Solicitor for collection.
- Withholding of refunds of other taxes as payment against LPT due.
- Interest and penalties may also apply.
Self-employed persons should also be aware that non-compliance with their LPT obligations may impact their other business taxes. It may affect their ability to obtain a tax clearance certificate or to receive refunds of other taxes. An income tax surcharge of 10% will also apply where the person has not filed their LPT Return and paid the LPT liability (or entered into a payment arrangement) by the time their income tax return is being filed. This surcharge will be capped at the amount of the LPT liability where they subsequently bring themselves into full compliance with their LPT obligations.
Revenue will also act in cases where deliberate under-valuation of property occurs. In these cases, Revenue may raise an assessment. That assessment may be appealed to the Appeal Commissioners. If you have complex tax affairs you may wish to consider contacting an AITI Chartered Tax Adviser (CTA) for professional assistance in meeting your LPT obligations.