The Finance (Local Property Tax) Act 2012 (as amended) provides for two different exemptions from the payment of local property tax (LPT) for residential properties that are purchased from 1 January 2013.
The qualifying purchase period ends on either 31 December 2013 or 31 October 2016, depending on whether the property is second-hand or new, respectively. These exemptions are described below.
Properties purchased from a builder or a property developer: Section 9 of the Finance (Local Property Tax) Act 2012 (as amended) provides for a temporary exemption from the payment of LPT for new and unused residential properties that are purchased from a builder or a property developer in the period 1 January 2013 to 31 October 2016. Where such a property is purchased and subsequently re-sold in this period, the new owner also qualifies for the exemption. Therefore, as new and unused properties held by builders/property developers on the introduction of LPT are already exempt, the exemption applies for the duration of the first LPT valuation period, that is, from 1 July 2013 up to the end of 2016.
Properties purchased by ‘first-time buyers’: Section 8 of the Finance (Local Property Tax) Act 2012 (as amended) provides for a temporary exemption from the payment of LPT for any residential property that is purchased in the period 1 January 2013 to 31 December 2013. The exemption does not distinguish between new and second-hand properties. However, in view of the exemption for new and unused properties purchased from a builder or a property developer, this exemption effectively applies to second-hand properties. This exemption differs from the exemption for new and unused properties in three respects, that is:
- The qualifying purchase period ends on 31 December 2013,
- To retain the exemption, the purchaser must occupy the property as his or her sole or main residence (and continue to do so), and
- If the property is subsequently resold in the period between 1 January 2014 and before the end of the first valuation period – that is, on or before 31 October 2016 – the exemption does not pass to the new owner.
It was intended that this exemption would be restricted to ‘first-time buyers’, as is clear from the head note to section 8 (‘exemption for first-time buyers’) and the explanatory memorandum to the Finance (Local Property Tax) Act 2012. However, read literally, the exemption applies to any purchaser and not just a first-time buyer. Having reviewed the legislation, Revenue has concluded that, notwithstanding the fact that the intention was clear, the legislation does not impose a liability to LPT on a non-first-time buyer of a second-hand house.
It is important to note that Revenue regards a property as having been purchased when the new owner is entitled to actually occupy the property, and not at any earlier stage in the purchase process, such as the exchange of contracts. Therefore, to qualify for the exemption, a purchaser of a second-hand property must have concluded the purchase of the property and be entitled to occupy it on or before 31 December 2013.
Refunds of LPT
Revenue are engaged in the process of identifying purchasers who may be impacted by this, and we will be writing to these individuals shortly to advise them that they may qualify for an exemption, subject to meeting the conditions of the exemption. The purchaser must make a claim for the exemption under section 8, and we will be detailing these requirements in our correspondence to them.
We have concentrated on trying to identify certain groups of people in order to contact them and give them the opportunity to either claim the exemption or pay their liability:
- Those who bought on or after 1 January 2013 and before 1 May 2013 and may have wrongly paid the 2013 LPT, and who will not have a liability for 2014, 2015 or 2016, and
- Those who bought after 1 May and before 1 November 2013, who will not have a liability for 2014, 2015 or 2016 (the vendor in these cases would have been liable to the 2013 charge),
- Those who bought in the period on or after 1 January 2013 and before 1 May 2013, but did not file a LPT1 return or pay the LPT and are now obliged to do so (in these cases, the purchaser will either claim an exemption or pay the liability for 2013 and 2014, depending on whether they are entitled to claim the exemption under section 8),
- Those who bought after 1 November 2013 and on or before 31 December 2013 will either claim an exemption or pay the liability for 2015 and 2016. The vendor in these cases will be liable for the 2014 charge.
Solicitors may wish to bring to their clients’ attention that only properties purchased in the period 1 January 2013 to 31 December 2013 and occupied as the purchasers’ sole or main residence qualify for the exemption under section 8 of the legislation.