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You asked, we answered: What you wanted to know about the property tax (pt 2)

After last week’s Q&A about the property tax you had more questions so we’ve been getting you more answers…

Image: House photo via Shutterstock

LAST WEEK WE answered some of the questions you had about the forthcoming property tax but those answers only led to more questions.

With the implementation of the tax just months away plenty of you are wondering whether or not you are liable, whether you are able to get an exemption of any sort and if you are liable, how much do you have to pay.

As we’ve mentioned before this helpful FAQ from the Revenue Commissionersthis graph and this blog from the economist Ronan Lyons should help you to get a basic understanding of the tax.

But in response to some of the questions you posed in last week’s Q&A we’ve got some more answers this week:

Q: Diarmuid Canning asked: “On the assessment date of the 1 May 2013 my house will be partly demolished and building will be under way, how do I value it?”

The simple answer at this stage is that we don’t have enough information from Revenue on the valuing procedures. But it has stated very clearly that the amount of property tax you pay will be based on the market value of your residential property on 1 May this year.

Assessing the value of the house will be up to you but will be based on the guidance provided by the Revenue in March when it sends out an LPT (Local Property Tax) Return. “If you follow Revenue’s guidance honestly, we will accept your property value assessment,” Revenue says.

Q: Tokidoll asked: “I’d be interested in finding out how those who purchased affordable housing will be assessed considering there is clawback involved e.g. you might sell it for 200k, but an agreed percentage of this must be given to the council. Will this be taken into account when taxing such homeowners?

Revenue told us this week that there is no provision for a discount in respect of the affordable housing scheme. But it pointed out there are a number of deferrals for owner-occupiers who are on low incomes: “There is a system of deferrals – where an owner-occupier’s gross income from all sources doesn’t exceed €15,000 for a single person or €25,000 for a couple, they will be eligible to apply for full deferral of the local property tax.

“Also, owner-occupiers may be eligible for a deferral of 50 per cent of the local property tax where gross income from all sources is less than €25,000 in the case of a single person and €35,000 in the case of a couple. Where the property was purchased with a mortgage, these thresholds are increased by 80 per cent of the mortgage interest payment.”

Q: Paula Nesbitt asked: “I’m just wondering if you live in an estate where you have to pay yearly management fees, which in some cases can cost 1k per year. Will these residents need to pay or at least have a reduced fee? Seems unfair to be charged twice for the up keep of your area.” A similar questioned was posed by Jim Jameson, who asked: “If you live in an apartment and already pay 1.5k upwards in management fees (as many do) for all your services, including maintenance and upkeep of local recreation areas most times, are they still laying their tax on top of that at the same rate or is there some allowance? Andrew Matheson also asked about this.

Unfortunately payment of management fees has no bearing on the amount of property tax a homeowner is liable for. So the short answer is no, there is no allowance, deferral or discount for people who pay management gees.

Q: Falstaff Oldcourt asked: “How permanent is the future household charge/tax? As in, this charge is being brought in under FG/Lab coalition administration. They speak about it being in place for ever more basically. But, can future governments or administrations abolish it once it is in place? Can a political party make it a part of their manifesto to abolish it if they ever get into power? I believe there was a council tax in place decades ago and it was abolished. Can it happen again?”

This is not an easy question to answer. But we do know that the property tax return you submit to the Revenue will apply until 2016, which is coincidentally the latest point at which the next general election can be held. Beyond that it is not clear what will happen although the government has pointed out that most European countries have property charges and that Ireland was unique in not having one.

It is of course at the discretion of future governments to abolish the property tax and for the record both Fianna Fáil and Sinn Féin oppose the introduction of the property tax. Most TDs on the independent benches also oppose the property tax as currently constituted.

Q: Jean O’Donovan asked: “In the case of a rental property, who is liable? Landlord or tenant?”

The simple answer is the landlord. Revenue says that where a residential property is rented on a normal short-term lease i.e. less than 20 years, the landlord is liable for the property tax. But that does not prevent them from adding the cost of the charge onto the weekly or monthly rent you pay.

Q: Alien8 asked a number of questions: A) I have co ownership of my house with my wife, who does not work but has her own PPS number. She should be exempt from this tax due to being unemployed, how do you register this split? B) I travel a lot with work, would it make sense to apply for a separation to remove an liability from this tax – we primarily got married to avail of joint tax assessment, so is this the next path? C) As this is an obvious case of double taxation, has anyone challenged the constitutionality of this in the courts… Is this not what we pay the DPP handsomely to do? D) can I check what self assessment Philip hogan has given to his house(s) and make sure that property taxes and second home taxes are recovered?

The answer to A and B is that that owners of a property are jointly and severally liable. This means that the Revenue will puruse the payment of the tax against both you and your wife but it will be up to you determine what portion you are each liable for. In other words, it is at your discretion to sort out who will pay what amount but your wife’s employment situation will not impact this unless you, as co-owners, jointly satisfy the criteria for a deferral, as mentioned above, if gross income is below a certain amount.

In answer to C, as far as we know the constitutionality of the tax has not been challenged in the courts and in answer to D it is unlikely you will be able to check this information as Revenue’s stated policy on most taxation matters is that it does not comment on individual cases.

Revenue also told us that the publication of tax defaulters applies to all taxes but only in cases where the liability is great than €33,000 which means it is unlikely that anyone’s name will be published for defaulting on the property tax alone.

Q: Mack asked: “I live in a small housing development of 24 house, they are 16yrs old but I only bought three years ago. So what I’m wondering is will all house be valued at the rate I paid or can we sit down and agree to devalue our houses to a lesser figure …”

Again this is likely to become a lot clearer when Revenue publishes guidance in March but the stated position now is that a property is individually assessed by its owner so the value of other properties in the surrounding area will not necessarily be an exact guide although it will probably be close.

Q: Garreth O’Mahony asked: “I’m self employed when is the tax liable in October when I make the return or earlier?”

The property tax comes into effect and thus homeowners are liable for it from 1 July this year. Revenue does say however: “Consideration is also being given to linking the timely submission of property tax returns and income tax returns from self-employed liable property owners.” Again, more detail about this is likely to come in March.

Q: Paul Walsh asked a number of questions:  1. If a person is in a position to defer for the next few years due to unemployment but in say 4 years their circumstances change and they get a job, will they then be liable for the deferral arrears which could be substantial on top of then being liable for that year’s charge. 2. If a person who has made use of the deferral scheme, but is in negative equity, sells their home who will get paid first the revenue or the bank? 3. The market value of a home on up to an acre is to be considered. Can a person on more than an acre select an acre around the house but excluding the entrance/access to value? 4. Have we any guarantee that the State will not sell on the debts/liens on the property?

Yes, the deferred amount and interest will remain a charge on the property and must be paid before the property is sold or transferred. While the order in which creditors get paid depends on the timing of the various charges. In the event of a sale of the property, the proceeds must be used to pay debts in the order in which those debts arose.
Revenue added: “Revenue will only have preferential creditor status over a mortgage provider where its local property tax liability was due and payable before the mortgage provider advanced a loan in respect of the property. On that basis, deferrals and charges for the local property tax should not have an effect on currently outstanding mortgages.”

Again, more detail on valuing the property is likely to become clear when the Revenue publishes guidance in March.

More Q&A: You asked, we answered: What you wanted to know about the property tax

Column: Dubliners should pay more property tax – here’s why…

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About the author:

Hugh O'Connell

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