Local Property Tax is an annual tax on the market value of residential property in Ireland. It was introduced in 2013 for a six month in respect of the latter, six-months of the year. It applies from 2014 onwards for a full year.
A residential property is any building or structure which is in use or suitable for use as a dwelling. It includes sheds, outhouses, garages and other building structures and yards enjoyed with the building.
The 2021 Act subtitutes the definition of “residential property” .It restructures the existing definition of “residential property” to make it clearer and provides that, in the case of properties exceeding an area of 0.4047 hectares (one acre), the part exceeding this area that is to be valued with the dwelling is the part that is most suitable for occupation and enjoyment with the dwelling.
A ‘residential property’ means any building which is in use as, or is suitable for use as, a dwelling. A shed, outhouse, garage or other building which is appurtenant to or usually enjoyed with a residential property shall be considered, for the purposes of this Act, to form part of the residential property.
Yards, gardens or other lands appurtenant to or usually enjoyed with a residential property as its garden or grounds are considered, for the purposes of this Act, to form part of the residential property. Where the total area of the yards, gardens and other lands,, exceeds 0.4047 hectares, only those parts of such yards, gardens and other lands, which would be the most suitable for occupation and enjoyment with the dwelling, up to a total area (exclusive of the area, at ground level, of the building of 0.4047 hectares, shall form part of the residential property.”.
LPT is a self-assessment tax. The onus is on each owner of property or other chargeable person to make the requisite return to the Revenue and satisfy the liability.
The return filing date is in November. There is an option for a return in paper form or online. Persons who own more than one residential property must file online. If a person is already obliged to file returns online, than their Local Property Tax return must be filed online. Corporates must file online.
A single return may be made for a property irrespective of how many owners. Revenue may assess and require returns from other owners. Each of the owners is jointly and severally liable for the tax.
The persons liable for Local Property Tax (LPT) include are as follows.
- The owners of residential property.
- A landlord where the property has been rented is rented for than 20 year.
- Lessees with an interest of 20 years or more.
- Trustees of property where they have a power to appoint.
- Personal representatives of the estate of a person who was previously liable.
- Local authorities or social housing organizations providing social housing. The values are deemed to be €100,000 until 2017.
- Persons with a life interest in residential property.
- Persons with rights of residence for life or 20 years or more that entitle them to exclude others from the property.
- Persons who occupy the property on a rent-free basis, without challenge or as of right.
Where two or more persons are liable they are jointly and severally liable.
Where two persons are liable to register then registration by either fulfil the obligation of the other.
Revenue may issue notices to persons liable by the return date. The issue of the notice is not a condition of liability nor does it remove the obligation to self-account for the tax.
In the case of a corporate, the return must be undertaken by the Secretary. In the case of non-resident companies, this includes representatives and managers of the company within the State.
A person who is not liable is obliged to notify Revenue within 30 days of receiving the notice, given the basis for non-liability. The revenue may consider the application and make a determination. This may be appealed to the Appeal Commissioners.
Where a person does not make the requisite returns and payment where obliged to do so, or enter the relevant arrangement, a 10% surcharge will apply. The Revenue may notify agents or managers of property or persons who collect rent requiring them to give statements of persons who are the owners or have the relevant interest in the property. Lessees and occupiers may be obliged to give details of the terms of their occupation and ownership and particulars of who is owner, lessor etc.
The Revenue may serve the relevant notice if it has reasonable grounds for believing that the recipient has the requisite information. Failure to comply is subject to a penalty in the sum of €1000.
Persons must self-assess the value. Guidelines were issued for assessment of value in May 2013 which was taken as the valuation date for the following until 2017. (2020)
Person selling property must disclose to the purchaser the chargeable value return. The purchaser may be obliged to submit a new return if the chargeable value declared was too low.
Revenue guidelines refer to the age of the property, average price per house type in area. Revenue issued estimates based on its own assessment of price based on factors including the price register. In the case of property on greater holding such as a farm, the house and area of land up to one acre is subject to the tax.
There are a number of options for payment. Payment may be made by direct debit, cash payments in equal instalments through an approved service provider, deduction from salary or pension, deduction from the Department of Social Protection payments, deductions from Department of Agriculture payments.
The payment method chosen in 2013 applies until an alternative is chosen. Where payment is by deduction from salary there is provision for notification to the employer and new employer.
Deduction for salary is the default method where an individual does not specify a method of payment in the return or fails to make payment through a specified method. Employers must give details of the deductions at year end.
The Revenue may enforce collection through a number of methods. The Revenue may collect LPT, demand it through deductions, attachment of bank accounts, sheriff or debt collection, withholding of tax refunds, registration of a charge against property.
A Tax clearance certificate will not issue if a person fails to pay LPT.
Interest at 8% applies to late payment plus penalties subject to a cap. There is no surcharge if the LPT return is filed and paid by the income tax date. The LPT interest rate is linked directly to the interest rate provided for in Taxes Consolidation Act 1997 by the 2021 Act so that any future changes to this rate will automatically apply to LPT without the need for a separate legislative amendment for LPT.
The 2011 household charges converted into a charge of €200 and is deemed LPT. NPPR does not apply in 2014 and subsequent years.
Revenue may make an estimate of an amount of LPT in relation to a liability date. Revenue has sent an estimated tax liability to property owners in 2013 notwithstanding that it is a self-assessment tax. They continued to do so in later years provided certain options were taken. Revenue have assessed their valuations on a number of factors.
Taxpayers may seek an alternative valuation from a professional valuer. Revenue reserve the right to review a formal valuation.
A person who has occupied a property on a rent-free basis without challenge and has a right to register title on the basis of adverse possession is accordingly subject to the tax. In broad terms, the onus is on the owner to disprove ownership if it arises as an issue.
In the absence of proof of title, it is presumed that the person in occupation is the liable person. This applies also to receipt of rents and profits. Revenue do not investigate title but reserve the right to do so.
The Revenue may correct the Revenue Register on application or as issues arise.
LPT is a charge on the property. This means that it can be enforced against the property by sale. In practice, the LPT needs to be discharged on the sale of the property or the buyer will not obtain unencumbered, good title. LPT proof of compliance is needed on sale.
There is an obligation on a purchaser to file an additional return if he has reason to believe the value in the seller’s return is not reasonable. LPT remains a charge on the property without time limit. The Statute of Limitations is specifically varied in this regard.
Where a property is sold, the seller must provide details of the chargeable value and a copy of the return. A penalty of €500 is payable on breach of this obligation.
The new owner must make a return if he/ she believe that the chargeable value returned is not a value that could reasonably have been relied on. A €3,000 penalty may arise for failure to file.
The LPT must be paid on sale if the property is sold within two months of the liability date. In practice the fact that it is a charge on the property will mean that it would be required to be discharged. The seller may require to recoup part of the prepayment under an apportionment.
The Law Society has taken the view that the standard apportionment clauses in the contract are insufficient for this purpose so that in a clause may be provided obliging the purchaser/buyer to repay prepaid LPT.
A trustee is liable for Local Property Tax if the trustee or beneficiary is entitled to possession of a residential property. In some cases both the trustee and beneficiary of the trust (who may hold it for example, for a life estate) may be jointly liable. A person with power to appoint maybe liable to Local Property Tax.
Only one return is required per property even if several persons are liable. In effect there is an onus on persons to agree liability and pay the tax. If none does so, the Revenue may collect and enforce against any of the persons liable.
Personal representatives of a deceased estate are liable. There is a 12 month grace period for an intestate estate or where the executor predeceased the deceased. After this has expired, persons in occupation or in receipt of rents are liable to the tax even before the grant of representation issues.
Accordingly, a caretaker may be liable once this twelve-month period has expired. A deferral of tax can be granted where no grant has been taken out within the first 12 months in respect of unpaid tax at death, deferred LPT on the part of the deceased and LPT falling due within three years following the death.
The deferred tax becomes payable once the personal representative is in a position to transfer assets to the beneficiary or distribute the proceeds of sale. The tax will in any event become due on the third anniversary of death. Irrespective of deferral.
The liability and valuation date for LPT is 1st November in the year before.The interest rate and the rate of LPT is that generally applicable i.e. 8% daily rate of 0.219%.. This may be changed by order from time to time
The 2021 Act requires for collection of certain information about the occupation of properties on a valuation date: the use of a property as a person’s principal residence, whether the property is occupied and if the property is not occupied, the period during which it has not been occupied and the reason for this. The information to be collected is restricted to its use in the compilation of statistical information.
Liable persons who are eligible for one of the exemptions specified must claim the particular exemption on a return. Revenue may make a determination that an exemption does not apply. Revenue must notify the liable person of its determination and the liable person then has a right of appeal against the determination to the Appeal Commissioners.
There is a right of appeal to the Appeal Commissioners against a Revenue specification that a person is the designated liable person in relation to a property for which there is more than one liable person.
This is the interest on deferred LPT. Late LPT is subject to the standard rate of interest. There is a deferral in respect of bankruptcy or significant hardship. However an application must be made to the Revenue and the exemption must be granted.
A person who files LPT late may be subject to an income tax surcharge under his general tax returns obligations. He is deemed not to have filed his income tax obligations on time if the LPT return is outstanding, so that the surcharge will apply. However it is capped at the amount of the LPT. The LPT surcharge is capped at the amount of LPT liability.
Additional compliance provisions apply.
A tax clearance certificate will not be available to self-employed taxpayers who have not complied with their obligations. Deduction at source applies if no election is made for method of payment.
The NPPR charge and household charge remain a charge on property for 12 years. There is no time limit for LPT.
Penalties, interest and surcharges
The maximum penalty is €3000 for failure to make return. Where an employer fails to comply with requirements, the employer may be subject to a penalty of up to €3,000.
If the employer fails to deliver an annual statement of the LPT deducted he is liable for a penalty of €500 per month that the return remains outstanding up to a maximum of €3,000. The Secretary is potentially liable to a separate penalty of €2000 in the case of a body corporate.
Both interest and surcharge may apply. The surcharge is up to a maximum of 100% liability.
Where a taxpayer fails to make the return, he may be subject to a surcharge on his income for up to 10%. However, if this is less than the LPT, it is capped at the amount of the LPT concerned. Accordingly if 10% of his income is less than the LPT charged then he may be subject to a surcharge for the shortfall.
There are provisiosn for appeals against Revenue assessments. A person who is non-compliant in relation to the LPT requirements to deliver a return and pay LPT is liable to a surcharge of 10 percent of the amount of tax contained in an income tax or corporation tax assessment where the person is also chargeable to those taxes.
Finance Act 2020 provides for ‘debt warehousing’ for income tax and universal social charge liabilities deducted by employers from their employees’ salaries. The amendment includes LPT deducted from salaries in these ‘debt warehousing’ provisions.
A liable person must be in compliance with his or her LPT obligations to obtain a tax clearance certificate. However, as the tax clearance provisions for certain public appointees are instead contained in the Standards in Public Office Act 2001, this Act is now being amended to include the requirement for LPT compliance.