close
Share with your friends

On 2 June 2021, Minister Donohoe announced changes to Local Property Tax (LPT), publishing the heads of the Finance (Local Property Tax) (Amendment) Bill 2021. While the legislative text of the Bill has not yet been released, the heads of the Bill provides a helpful overview of the measures that the Bill is expected to introduce, as Carmel Logan explains.

The main change for taxpayers will be that certain exempt / excluded properties will be brought within the charge to LPT.  For those already paying LPT, it is expected that up to 53% of taxpayers should not experience any change in their LPT liability as a result of the new measures, whereas 11% of taxpayers should see a decrease in their liability. Of the remaining 36%, the liability of 33% of taxpayers should increase by no more than €100, with 3% expected to incur an increase of over €100.

The measures are expected to deliver an overall yield of approximately €560m, before the application of local adjustment factors to be applied by local authorities. As outlined in the Programme for Government, these funds will be retained within the county in which they are raised and will provide welcome funding to local authorities to support regional projects and initiatives. 

Valuations & Valuation Dates

The new measures specify 1 November 2021 as the next valuation date for LPT purposes. Thereafter, property valuations will be reviewed every 4 years (previously 3 years). A summary of the amended rates of LPT and the valuation bands to which the rates are applied are outlined in Table 1 below.

The Bill will provide that new properties will be brought within the scope of LPT charges from 2022 onwards, with the valuation in place at the previous valuation date (1 November 2021) to be applied in calculating the LPT liability. The announcement confirms that Revenue will provide guidance to assist property owners to determine this value with respect to properties that were not “residential properties” on the preceding valuation date because they were completed, or refurbished to a habitable condition, after that date. This valuation method will take account of general movements in property values since the valuation date and will ensure that the method will be equitable when compared with properties that are already chargeable to LPT. Such properties will then be valued on the normal basis from the following valuation date.

The new measures remove a previous commitment that, with respect to properties worth less than €1m, Revenue would accept a taxpayer’s self-assessment at ‘face value’ where the valuation was made in accordance with Revenue guidance. The heads of the Bill notes that this previous commitment was provided in the context of LPT being a totally new and unfamiliar tax, but it is now appropriate to remove this measure as the system has now been in place for 8 years. Therefore, once the new provisions are brought in, LPT self-assessments will be subject to the usual Revenue compliance checks that apply for other self-assessed taxes.

Exemptions & Deferrals

The new measures will also introduce significant changes with respect to exemptions available in the LPT regime, including:

  • In order to broaden the base of properties subject to LPT:
    • Various exemptions will lapse including exemptions for first-time buyers who purchased property during 2013, houses which were held as trading stock when LPT was first introduced in May 2013, and homes in “ghost estates”, and
    • New homes constructed at or before the new valuation date of 1 November 2021 will also come within the charge.
  • The temporary exemption in respect of certain pyrite damaged properties is to be phased out. However, a new exemption will be brought in for certain homes that are eligible for the Defective Concrete Blocks Grant Scheme, with this exemption expected to operate in a similar way to the existing exemption for pyrite damaged properties.
  • Currently, properties vacated by their owners due to illness can be exempt from LPT. However, this exemption applies only where the property is not occupied by another person. It is proposed to remove this condition so that owners in these circumstances who make their property available for occupation will be exempt from LPT. In addition to freeing-up residential properties for rental, it is intended that this measure will also enhance security of the premises and assist the maintenance of homes for vulnerable individuals.
  • Finally, a new exemption has also been introduced with respect to properties owned by a North-South Implementation Body (e.g. Waterways Ireland, Food Safety Promotion Board, etc.).

The income thresholds for deferral of LPT (including marginal relief) are to be increased for both single owners, as well as married and co-habiting couples. In addition, the interest on deferred payments is to be reduced from 4% to 3% per annum, which is significantly less than the approx. 8% rate of interest that applies on the late payment of LPT in the absence of such a deferral. 

Transactions with Local Authorities & Approved Housing Bodies

The new measures will introduce new rules with respect to certain property transactions with local authorities and social housing bodies:

  • At present, where a private owner of a residential property leases the property under a 20+ year lease to a local authority for social housing purposes, the owner ceases to be the liable persons for LPT purposes. The new measures provide that in the case of such long leases to a local authority or social housing body, the lessor will remain the liable person with respect to LPT.
  • In most circumstances, where a property is transferred to another liable person during the valuation period, the purchaser should be entitled to use the valuation in place at the previous valuation. However, the new measures provide that this treatment should not apply where a property is purchased from a local authority or approved housing bodies, and the purchasers of such properties will have to pay LPT based on the actual value of the property under the new rules. This is to ensure that purchasers of such properties cannot rely on the deemed valuation that is available to such bodies (which ensures that only €90 of LPT is payable with respect to residential property owned by them).  

Definition of Residential Property

The new measures will also amend the definition of “residential property” for LPT purposes. Specifically:

  • The part of the adjoining land to be valued with the house, where that land exceeds one acre, will be specified to be that part that is most suitable for occupation and enjoyment with the house (to bring it in line with definitions elsewhere in tax law).
  • A definition of “co-living” developments will be included to come within the scope of residential property for the purposes of LPT. There is no indication as yet as to how co-living developments will be defined in the new legislation; however we believe it is important that this definition provides that each individual unit in a co-living development is separately chargeable to LPT (rather than the development as a whole), as is the case at present for apartment developments. 

Compliance

The new measures will also introduce some notable changes regarding the compliance obligations on liable persons with respect to LPT, including:

  • The new measures include a requirement for a return to be filed in respect of exempt properties going forward and that the return should include a claim to such exemption. Previously, no return was required with respect to exempt properties and exemptions were deemed to apply without a specific claim.
  • Information regarding vacant properties will need to be included in an LPT return going forward. 

Table 1

The table below compares the LPT valuation bands and associated charge under the current and new rules:

 

Current Band Structure

 

Proposed

 

 

Band

Charge

Band

Charge

1

0 – 100,000

90

1 -200,000

90

2

100,001 – 150,000

225

200,000 -262,500

225

3

150,001 – 200,000

315

262,501 - 350,000

315

4

200,001 – 250,000

405

350,000 -437,500

405

5

250,001 – 300,000

495

437,501- 525,000

495

6

300,001 – 350,000

585

525,001-612,500

585

7

350,001 – 400,000

675

612,501 - 700,000

675

8

400,001 – 450,000

765

700,001- 787,500

765

9

450,001 – 500,000

855

787,501 – 875,000

855

10

500,001 – 550,000

945

875,001 – 962,500

945

11

550,001 – 600,000

1,035

962,501 – 1,050,000

1,035

12

600,001 – 650,000

1,125

1,050,001 – 1,137,500

1,190

13

650,001 – 700,000

1,215

1,137,501 – 1,225,000

1,409

14

700,001 – 750,000

1,305

1,225,001 – 1,312,000

1,627

15

750,001 – 800,000

1,395

1,312,501 – 1,400,000

1,846

16

800,001 – 850,000

1,485

1,400,001 – 1,487,500

2,065

17

850,001 – 900,000

1,575

1,487,501 – 1,575,000

2,284

18

900,001 – 950,000

1,665

1,575,001 – 1,662,500

2,502

19

950,001 – 1,000,000

1,755

1,662,501 – 1,750,000

2,721

20

Over €1m

 

1,750,001+

2,830+

Notes

  • The number of bands is maintained at 20, although the ranges of each band are to be amended as per the table above.
  • The LPT charge is fixed at the current charge for Bands 1 & 2 (€90 and €225 respectively).
  • For properties in bands 3-19, a mid-point rate of 0.1029% is charged.
  • For properties valued at between €1m and €1.75m (bands 12-19), a mid-point rate of 0.1029% is charged on the first €1.05m and 0.25% on the balance over €1.05m.
  • For properties worth over €1.75m, they will be charged as per properties in bands 12-19 as outlined above on the first €1.75m of their value, with a higher rate of 0.3% on the property’s value in excess of €1.75m.

Get in touch

If you have any queries regarding the Local Property Tax, please contact Carmel Logan. We'd be delighted to hear from you. 

More in Tax