Passing on the Local Property Tax Burden: Some Practical Considerations

Tina Curran Associate, William Fry Tax Advisors/Taxand IrelandJessica Hayes Tax Consultant, William Fry Tax Advisors/Taxand Ireland

IntroductionLocal property tax (LPT) was introduced in Budget 2013

following recommendations in the Thornhill Report. The

relevant legislation includes the Finance (Local Property Tax)

Act 2012 and the Finance (Local Property Tax) (Amendment

Act) 2013, both of which have been consolidated in the Finance

(Local Property Tax) Act 2012 (“the Act”).

After a flurry of resistance among the Irish taxpayers, the LPT

now forms a fundamental part of the total tax revenue for the

Irish Exchequer, and compliance figures reported to date have

proven to be very high. The total Exchequer returns for the

2015 period from LPT have been reported to be in the region

of €305m (including €6m relating to the household charge),

and the overall compliance rate for 2015 has been estimated

to be 97%1. The Revenue Chairman, Niall Cody, told the Public

1 See Revenue, “Local Property Tax (LPT) Statistics: Preliminary, 2nd July 2015”, available at www.revenue.ie/en/tax/lpt/lpt-stats-0715.pdf .

114 Passing on the Local Property Tax Burden: Some Practical Considerations

Passing on the Local Property Tax Burden: Some Practical Considerations

Accounts Committee on 6 July 2015 that more than 1,000 LPT cases

had been referred to the sheriff for collection. As at that date, no

LPT liabilities had been referred for court action, and Revenue had

not used its attachment powers to secure payment2.

Who Is Liable for Payment of LPT?Generally, the registered owner of the property will be liable for

payment of the LPT. Revenue has provided guidance for establishing

who is the liable person in more complex situations: for example,

where the legal and the beneficial owner of the property differ.

Revenue guidance states that the LPT is payable by:

› 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,

› legal personal representatives of a deceased property owner (e.g. executor/administrator of an estate) and

› trustees, where a property is held in a trust.

The owner of the property on the liability date is liable for the LPT.

The relevant date is 1 November of the preceding tax year.

Where there is more than one owner of the property, each of

the owners will be joint and severally liable for the LPT, and it is

important that they agree who will file the return and pay the LPT.

Only one return is required per property, and Revenue has the right

to collect the LPT form any one of the owners.

Impact on Estates: Passing on the BurdenAs included in the list above, on death, the liability for LPT will

become the responsibility of the legal personal representative of

the estate. LPT is a self-assessed tax, and the person liable for

discharging the LPT is responsible for valuing the property, filing

the return and paying the tax.

Practically, until the point in time where a grant of representation

has been extracted, Revenue may not be aware of the death of

the property owner and that the legal personal representative will

be the person responsible for discharging the LPT. Therefore, the

legal personal representative may not be issued with the notice of

assessment of the LPT. It will be important for any legal personal

representative to check the relevant property to ensure that the

notice is delivered there, or alternatively,

the legal personal representative can

notify Revenue before the LPT deadline.

The legal personal representative must

contact Revenue within 30 days of

receiving the Revenue letter. Details such

as the legal personal representative’s

name, address, PPSN, the reasons why

they are not the owner for the purposes of

LPT and necessary supporting documen-

tation must be provided to Revenue.

As part of a legal personal representative’s duties, there is an

obligation to discharge all liabilities of the deceased’s estate, and

this includes the LPT. Legal personal representatives are obliged

to discharge any liabilities of the estate in priority to making any

payments to beneficiaries.

Valuing a PropertyGenerally, an absolute valuation for properties is not required

except in the case of properties valued at over €1m. A taxpayer

can seek a valuation from a professional valuer. Alternatively,

Revenue indicates that if the property was purchased or valued

in recent years, the relevant valuation at the time of acquisition

can be used for LPT once it is adjusted for any movements in

the market since the date of acquisition or valuation. Revenue

suggests that other sources of information, such as the

property section of local newspapers, information from local

estate agents and property websites might be used. Revenue

has confirmed that if a taxpayer values a property using the

Revenue guidelines for valuation, the valuation will not be

Generally, the registered

owner of the property will

be liable for payment of the

LPT. Revenue has provided

guidance for establishing who

is the liable person in more

complex situations.

2 See https://www.charteredaccountants.ie/en/General/News-and-Events/News1/2015/July/Local-Property-Tax-so-far-this-year.

2016 Number 2 Passing on the Local Property Tax Burden: Some Practical Considerations 115

challenged if the value is €1m or less. Revenue has reserved the

right to review a formal valuation. Once a property is valued for

the purposes of paying LPT in 2013, this valuation can be used

up to and including the tax year 2017 (as extended in Budget

2016). For the vast majority of properties, Revenue’s published

guidance regarding property valuation bands will provide owners

with sufficient information that, along with the owner’s own

knowledge will enable them to determine the correct valuation

band to apply.

For those who find themselves in the position of being appointed

as legal personal representative, the position may differ. As part

of their duties, the legal personal repre-

sentative will be obliged to complete Form

CA24 (Inland Revenue Affidavit), which is

a schedule of the deceased’s assets and

liabilities as at the date of death. As this

is a sworn document, it is best practice for

any legal personal representative to obtain

formal property valuations. The formal

valuation can be used for determining the

LPT arising in the estate period.

Sale of the PropertyIn the event that the property is sold (either

in the course of administration of the estate

or by a beneficiary at a later stage), it will be important to have

evidence of full LPT compliance that can be provided to the

purchaser or his/her solicitor. Failing to provide such evidence

may result in an amount the LPT amount being withheld from

sales proceeds. Generally, the purchaser’s solicitor will ask for

confirmation in the form of a tax clearance certificate, and this

may form part of the completion deliverable to be provided

before the sale closes. Ultimately, a charge can be put against

the house, and any accrued interest must be discharged before

the property can be sold incumbrance-free.

How Do I Qualify for a Deferral of LPT?In certain circumstances, a liable person may opt to defer

payment of LPT. A deferral is not an exemption, and 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 must

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 are

available on the Revenue website:

› income threshold,

› personal representative of a deceased person,

› personal insolvency and

› 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 he/she is making interest payments.

Only owner-occupiers may opt for this

category of deferral; it is not available

in respect of second homes or rental

properties. Deferral under this category

is granted on a self-assessment basis;

the person makes a claim for deferral on

his/her 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 three categories must also file an additional

LPT2 form, as well as the normal LPT1 return, and provide the

information required on the form.

Revenue Seeking Powers and PenaltiesRevenue has wide seeking powers to ensure that taxpayers

fully comply with their LPT obligations.

In the event that an LPT return is not submitted, Revenue

will pursue the collection of its LPT estimate using a range of

methods, including:

As part of their duties,

the legal personal

representative will be

obliged to complete Form

CA24 (Inland Revenue

Affidavit), which is a

schedule of the deceased’s

assets and liabilities as at

the date of death.

116 Passing on the Local Property Tax Burden: Some Practical Considerations

› deduction 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 and

› withholding of refunds of other taxes as payments against LPT due.

Interest (c. 8% per annum) and penalties may also apply where

the LPT becomes due.

Liable persons who are obliged to file income tax, capital

gains tax or corporation tax returns will incur a 10% late-filing

surcharge if they have not filed their LPT return or paid their

LPT at the time that the income tax, corporation tax or capital

gains tax return is filed.

S e l f - e m p l oye d p e r s o n s s h o u l d a l s o b e a w a re t h a t

non-compliance with their LPT obligations may impact on 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 individuals

have not filed their LPT return and paid the LPT liability (or

entered into a payment arrangement) by the time that 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 also has the right to act where deliberate undervalu-

ation of property occurs. In these cases, Revenue may raise an

assessment. That assessment may be appealed to the Appeal

Commissioners.

Key Dates and Steps To Be Aware of

› Assess the market value of the property in line with the Revenue guidelines and other guidelines outlined above.

› Complete the LPT return, insert the amount of LPT payable and select a payment option (direct debit instalments, bank single debit authority, cash payments through the Post Office, etc.).

› File the LPT return:

› by 7 May if filing a paper return or

› by 28 May if filing a return online.

› Pay the LPT liability in accordance with the payment option indicated on the LPT return. Where you have opted to have the LPT deducted from your salary or pension, this will be done by your employer or pension provider. The relevant payment dates are:

› 1 July: payment by one single payment or phased

payment starts,

› 15 July: direct debit payments start,

› 21 July: single debit authority payment deducted.

Read more on Law of Capital AcquistionsTax, Stamp

Duty & LPT, Finance Act 2015

Talk to Judy about your idea on +353 1 663 1720 or jhutchinson@taxinstitute.ie

• Be published in Ireland’s tax technical journal of excellence.

• Enhance your professional profile.

• Irish Tax Review is read by over 6,000 professionals.

Are you interested in writing for the Irish Tax Review?

2016 Number 2 Passing on the Local Property Tax Burden: Some Practical Considerations 117