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Did you know that if Local Property Tax is not paid on time, a surcharge becomes payable? There have been several changes recently to the Local Property Tax (LPT) regime. Property owners should ensure they are aware of these changes. In this article David Ryan, Partner, CKT and Cliona O’Brien, Trainee Solicitor, CKT look at these new rules and the implications for property owners.

What is Local Property Tax?

Local Property Tax (LPT) is a tax that applies to residential properties in Ireland. It was introduced in 2013 and is an annual charge payable by the owners of residential property. LPT is a self-assessed tax based on the owner’s valuation of the property.   A series of property valuation bands were devised in the Finance Act showing the amount of LPT payable in correspondence to the value of the property.

LPT acts as a registered charge on a property.  This charge will continue to remain on the property until it is paid. To sell a property, all LPT charges for the applicable year must be paid in full in advance of completion of sale. The date which determines the owner’s liability for each year for LPT is the 1st of November in the previous year e.g., an owner of property on 1st November 2022 will be the liable person for LPT for 2023.

Changes to the LPT regime in 2022

In 2022, new changes have been announced to the LPT regime. These include:

1. Valuations

To establish how much LPT must be paid, the value of the property must first be determined. The new valuation period for LPT is 1st of November 2021 and will remain in place until 31 December 2025. This means that valuations of properties will now be reviewed every four years, increased from the previous period of three years.

Additionally, for properties under the value of €1 million, the previous self-assessment valuations will now be subject to compliance checks by revenue. Revenue provides guidelines on self-assessment here, or an official valuation from a valuer can be sought. A new body called the Land Values Reference Committee will now adjudicate valuation appeals instead of the Tax Appeal Commission.

2. Rates

LPT was previously calculated at a rate of 0.18% of the value of a property up to a value of €1 million, with any value in excess of €1million subject to LPT calculated at a rate of 0.25%.

Now, for properties valued up to €1.75 million a rate of 0.1029% will be charged on the first €1.05 million and 0.25% on the balance over €1.05 million. For properties valued over €1.75 million, LPT is calculated at rate of 0.1029% up to €1.75 million, with a higher rate of 0.3% for value in excess of €1.75 million.

3. Exemptions

Some properties are exempt from paying LPT (e.g. properties which are uninhabitable). Previously, no return was required if a property was exempt from LPT.  However, a return must now be submitted to Revenue even if a property is exempt from LPT.

Under the new LPT regime, fewer exemptions are now available. The following are examples of properties which are no longer exempt from LPT;

• Completed properties previously classified as part of a builder’s unsold trading stock;
• Properties purchased by first-time buyers since 2013;
• New homes constructed at or before the new valuation date of 1 November 2021;
• Properties damaged by pyrite are no longer exempt (however a Defective Concrete Blocks Grant Scheme may be available to these properties)

New exemptions to LPT

• Properties owned by a North-South Implementation Body (e.g. Waterways Ireland, Food Safety Promotion Board, etc.)
• Properties which an owner has vacated due to illness and is in occupation by someone else.

4. Additional new rules regarding LPT

• If LPT is not paid on time, a surcharge becomes payable. This surcharge could previously accumulate up to the full value of LPT payable. From 2022 onwards, the surcharge is now capped at 50% of the applicable LPT liability.
• Vacant properties will now have to be identified in LPT returns.
• The classification of property will have to be specified in LPT returns i.e. if the property is a sole residence or an additional property.
• Under the previous LPT regime, if a person leased their property to a local authority for a period over 20 years, the local authority was subject to the payment of LPT. Under the 2022 regime, the rules have changed to provide that it is the lessor who is liable for LPT.

5. Changes to General Clearance

In order to complete the sale of a property in circumstances where the sale price does not correspond with the value of the property submitted in the LPT return, it must be determined as to whether specific clearance must be obtained from Revenue. General clearance means that an application to revenue is not required. Changes have been made to the general clearance regime under the new rules. Now General Clearance applies if:

• the sale price is under €350,000; or
• the sale price does not exceed 95% of the LPT band the property was placed in up to November 2021 and not 10% over the upper value of the new valuation band.

More information regarding the changes to General Clearance requirements can be found here.

Conclusion

Overall, there have been several changes regarding LPT in Ireland under the new rules.  More properties have been brought within the LPT regime, such as all new homes constructed on or after November 2021 and completed properties previously classified as trading stock. It is envisaged however, that as a result of the changes made to the valuation bands, the majority of those already paying LPT will not be subjected to an increased LPT liability under the new regime.

David Ryan is a Partner in our Property Department. If you have a question relating to the above article, please contact a member of the team.