The Local Property Tax (LPT) system is changing for the first time since it was introduced in 2013.
The Finance (Local Property Tax) (Amendment) Act 2021, which was enacted on 22 July 2021, has legislated for a number of updates to the original LPT regime.
Up until now, property owners have been liable to an LPT charge based on a valuation of their property as at 1 May 2013. A new valuation period will begin on 1 November 2021, with Revenue seeking a valuation of a property as at this date. The value obtained will then determine the LPT charge for that property for the years 2022 to 2025.
What needs to be done now?
- Determine the market value of residential property at 1 November 2021
- Submit an LPT return by 7 November 2021
- Make arrangements for paying the LPT charge
Once the value of the property as at November 2021 has been determined, an LPT return should be submitted by 7 November 2021. If an LPT return is not filed by this deadline, Revenue will seek to collect the LPT that they had estimated to be due, but the property owner is still obliged to submit a return.
The easiest way to submit an LPT return is via the Revenue website. To log in to the LPT online portal, the PPS number of the property owner, the Property ID and the PIN are required. The Property ID and PIN will be contained in the letter received from Revenue.
If a taxpayer has not used the LPT online service in previous years, they will receive a paper LPT return (Form LPT1). If your property is valued in excess of €1.75 million or if you are liable to LPT on more than one property, the option to submit a paper return is not available.
The property owner should confirm their preferred LPT payment option for 2022 when filing the LPT return.
There are a number of payment methods available:
- Single payment in full via:
- Debit or credit card
- Annual Debit Instruction
- One-off cash payment through an approved Payment Service Provider
- Phased payments (instalments) to spread the payments throughout 2022:
- Monthly direct debit
- Weekly or monthly cash payments through an approved Payment Service Provider
- Deduction at source (from salary, wages, occupational pension, Department of Social Protection payment or Department of Agriculture, Food and the Marine payment)
The payment option in operation for 2021 will remain in place unless a different option is selected as part of the LPT return filed for 2022.
The deadline for payment of the LPT charge for 2022 depends on the payment option chosen:
- 12 January 2022 – latest date for paying in full by cash or cheque
- 15 January 2022 – monthly direct debit payments start and continue on the 15th day of every month
- January 2022 – phased payments start for deductions at source and regular cash payments through a payment service provider
- 21 March 2022 – deduction date for Annual Debit Instruction payment
Valuations
The deadline for submitting a valuation of a property to Revenue is 7 November 2021. As mentioned above, the valuation must be as at 1 November 2021. Revenue have provided an interactive tool and guidance to assist with determining the value of property (https://www.revenue.ie/en/property/local-property-tax/valuing-your-property/interactive-valuation-tool.aspx). Once the Eircode of the property is entered, an interactive map will give a price band for that address.
Revenue have acknowledged that the average valuation band that is shown for an area using their tool may not reflect an individual property's value.
Property owners may wish to obtain a professional valuation if they feel that there may be a discrepancy between the valuation band suggested for their property and its actual value, or, if it appears that the property may be between two price bands. Alternatively, Revenue will accept alternative sources to be used in arriving at a valuation such as the Residential Property Price Register, newspapers, local estate agents or property sales websites. A record of the sources used should be retained as it may be requested by Revenue at a later date.
Revenue have indicated that they will not challenge valuations that are submitted one band lower than the guidance provided by their tool. It is likely, however, that anything lower than this would lead to a request for supporting documentation.
Properties that have a market value in excess of €1.75 million are not placed in a valuation band, the property owner must submit an actual valuation.
Previous legislation prevented Revenue from overriding self-assessed valuations submitted by property owners where those valuations did not exceed €1 million and were arrived at using Revenue guidance. However, the Finance (Local Property Tax)(Amendment) Act 2021 states that the self-assessed valuations for properties on 1 November 2021 will be subject to Revenue's compliance regimes in the same way as other self-assessed taxes.
Given that properties have not been revalued since 2013, property owners may be concerned that they will now be facing a much larger LPT liability as a result of the current house prices. However, this should not be the case, as the valuation bands have been widened and the rate at which the tax is levied has been reduced to take account of this. In fact, in some cases, the LPT charge may even be reduced. For example, if your property was valued at €265,000 in 2013, it would have fallen into the €250,001 - €300,000 valuation band which resulted in an LPT charge of €495. If the same property is now valued at €340,000 at November 2021, the relevant band for the 2022 – 2025 valuation will be €262,501 - €350,000. The basic LPT charge for this band is €315. It is important to note that Local Authorities can apply a "Local Adjustment Factor" to the basic rates, which can increase or decrease the charge by up to 15%.
Property owners should have received correspondence from Revenue requesting a valuation and outlining an estimate of the LPT due. This estimate will be replaced with the actual LPT liability once a self-assessed valuation has been submitted as part of an LPT return.
It should be noted that the estimate of LPT due provided by Revenue is not based on an actual valuation of the property. As LPT is a self-assessed tax, the homeowner must provide a valuation.
Exemptions from LPT
A number of categories of residential property are currently exempt from LPT (once they meet the required qualifying conditions). These are properties that are:
- fully subject to commercial rates
- vacated for an extended period by a person with a long-term mental or physical infirmity
- registered nursing homes
- used to provide special needs accommodation
- used by a charity in connection with the provision of recreational activities
- certified as affected by significant pyrite damage (this exemption only applies where the qualifying conditions are met before 21 July 2023)
- occupied by permanently and totally incapacitated people
- owned by a North-South Implementation Body under the British-Irish Agreement Act 1999
- eligible for the Defective Concrete Blocks grant scheme
If a property falls into one of the above categories and is eligible for an exemption, the property owner must still submit an LPT return containing a valuation at 1 November 2021 by 7 November 2021 to claim the exemption. This is an important change to the previous regime where no return was required to be filed in respect of exempt properties.
Properties previously exempt from LPT
The Finance (Local Property Tax)(Amendment) Act 2021 terminated a number of exemptions from LPT that were in operation for the valuation period from 2013 to 2021. The categories of properties that were previously exempt but now chargeable to LPT from 2022 are:
- unsold and unused trading stock of a builders/property developers at May 2013 and subsequent purchases of such properties
- properties purchased by a ‘first-time buyer’ during 2013
- properties situated in a specified unfinished housing estate
Owners of properties in the above categories must register newly-liable properties online with Revenue and are obliged to submit a valuation and file an LPT return by the 7 November deadline.
Consequences of unpaid LPT
There are a number of ways that Revenue can enforce the collection of unpaid LPT:
1. LPT-generated surcharge
A taxpayer with an unpaid LPT liability may trigger a surcharge on an income tax, corporation tax or capital gains tax return filed after the LPT payment date / return filing date. The surcharge can amount to 10% of the taxpayers income tax, corporation tax or capital gains tax liability, but is capped at 50% of the LPT payable. This cap has been reduced from the previous cap of 100% of the LPT payable.
The year of assessment for which the income tax / corporation tax / capital gains tax return is filed does not need to be the same year for which the LPT liability is due.
If the outstanding LPT return or payment is made before other tax return is filed, a surcharge will not be applied to that other tax return.
2. Tax Clearance
Finance (Local Property Tax)(Amendment) Act 2021 states that non-compliance with LPT obligations may result in tax clearance applications being refused and existing tax clearance being rescinded.
Charlotte Cumiskey, Tax Manager, ccumiskey@bdo.ie
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