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Opinion: Do rising property prices impact on Local Property Tax payments?

It seems like every month there’s new confusion regarding the Local Property Tax; let’s clear up a couple here.

Christine Keily

IT SEEMS LIKE every month there’s a new confusion regarding the Local Property Tax – despite the “success” of the tax many homeowners throughout Ireland remain unsure of their position and are worried that they have either overpaid or underpaid as a result. Here, I hope to clear up a couple of ambiguous LPT issues that arose recently.

Because there has been so much media buzz around rising property prices of late, lots of people are now asking what this means for them in terms of this year’s LPT payment. For example, if you are in a South County Dublin suburb and your neighbour sold their house this year for €60,000 more than you valued yours last year – do you need to alert the Revenue?

Generally speaking there is no requirement for an individual to revalue their property. A property owner’s initial valuation, based on the valuation date of 01 May 2013, is fixed for the next three years. According to the Revenue guidance, “The valuation of your property for LPT purposes on 1 May 2013 will stay the same for 2013, 2014, 2015 and 2016”.

The LPT charge will not change until 2017

Therefore, subsequent rises, or indeed falls, in the market value will not affect this initial valuation. The only basis on which Revenue could challenge your valuation is if they believe that the initial valuation made on 01 May 2013 was incorrect at that date. This is clearly a subjective question, but Revenue has been clear that they will not challenge valuations which were “honestly and reasonably” arrived at.

So, if you based your initial 01 May 2013 valuation on the price of similar properties in the area, a professional valuation, or some other similar method which provided what is a reasonable value, Revenue will not contest this valuation, even if your house doubles or triples in value in the next two years.

Even if your property’s value increases through improvements, the LPT charge will not change until 2017. Again, the Revenue FAQs are clear on this – “The valuation of your property for LPT purposes on 1 May 2013 will stay the same for 2013, 2014, 2015 and 2016 no matter what improvements you make to your property.”

So, property owners can rest assured that their initial honest and reasonable valuation will not be challenged and there is also no obligation or reason to engage with Revenue until their next valuation date of 01 November 2016.

If, of course, a property owner feels that their initial value was not honest or reasonable they should consider revaluation.

Deferrals

It would appear that many people entitled to defer the tax have made payments. However, it is important to remember that this is just an option, ie everyone entitled to defer does not have to take this option.

Deferral carries with it a 4% per annum interest charge and this would need to be considered by anyone facing such a decision. People entitled to defer may choose not to as they know that they are only putting off a charge they has to be paid at a later stage with interest. Many older people may, for example, be concerned with leaving a debt for their children to pay. Of course, it is important for anyone in these circumstances to have enough information in order to make their choice but ultimately this is their choice.

LPT reliefs for disabled and incapacitated individuals

Recently Minister Noonan has announced that he will be correcting some “anomalies and inequities” in the Local Property Tax (LPT) legislation relating to reliefs for disabled and incapacitated individuals. Currently there is an exemption from LPT for certain properties purchased, built or adapted to cater for a permanently and totally incapacitated individual. In order to qualify for the exemption, the individual must be in receipt of an award from a Court or from the Injuries Board or a public trust fund must have been established for their benefit. This requirement is to be removed.

A person liable for LPT may avail of a reduction in the value of their property for LPT purposes if that property has been adapted for occupation by a disabled person and the adaptation has increased the market value of the property. To qualify for this relief the adaptation must has been grant-aided. The Minister is removing this condition from the relief.

These changes are effective from 1 July 2013. Revenue has just issued new guidelines on the issue.

LPT becoming accepted as the norm

Now that everyone has accepted that the LPT is not going anywhere it’s important that we all know exactly how it affects us – and the nature of the tax is that it will impact people differently depending on their situation.

We are still in the “settling in” phase of the initiative and, as such, we believe that questions around the LPT will continue to pop up periodically and should be addressed as soon as they arise. That said, recent Revenue figures have revealed that there has been a significant decrease in the percentage of property owners planning to pay their Local Property Tax by one off ad-hoc methods of Debit or Credit Cards – both of which have more than halved between 2013 – 2014. This signals a more planned approach to the payment of the LPT – with the use of Direct Debits doubling in the last 12 months.

Unfortunately one this is certain: the Local Property Tax is here to stay.

Christine Keily is Head of Direct Taxes at www.taxback.com

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Christine Keily

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