Are you ready for the property tax valuations?

Starting this week every homeowner will receive a notice from the Revenue that includes some guidelines on how to value their property for local property tax (LPT) purposes as well as the Revenue’s own estimation.

Starting this week every homeowner will receive a notice from the Revenue that includes some guidelines on how to value their property for local property tax (LPT) purposes as well as the Revenue’s own estimation.

Money Express with Jill Kerby sponsored by Laya Healthcare

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If you accept the Revenue’s valuation, then all you have to do is sign the declaration of chargeable value and send it back to them with the half-year payment by May 7 or May 28 if you pay on-line. If you believe you qualify for either an exemption (say, as a new first-time buyer, or live in a ghost estate) or a deferral (because you are on welfare, or have a very low income), you still need to fill out the appropriate application and return them both to Revenue. (Go to www.revenue.ie for the official LPT Guide.)

If you opt to do your own valuation, you might want to get cracking: late returns and payments will carry stiff penalties and by July 1, the Revenue will take action to just take the tax payment from your wages, your bank accounts, from your social welfare payment or farm payments.

The legislation permits them to enter and inspect your home if hey so wish, and they can reopen your file and question your valuation at any time during each LPT payment term (3.5 years from mid 2013 to November 7, 2016, but four years thereafter) even if you’ve agreed with their valuation.

Making a false declaration, or refusing to make one, both carry fines that start at €500 per month and rise to €3,000. Delaying your payment carries an interest penalty of 8% per annum on any arrears. Even opting for a deferral – which only applies if you are on a very low income, will incur a cost 4% per annum interest charge whenever you do get around to paying the back tax.

Not paying LPT on time could also trigger a wider audit of your income tax or corporate tax position and should you decide to sell your house between now and November 2016 when this first LPT valuation term ends, there is a €500 fine for not disclosing the LPT to a buyer. (Who would buy a house without finding out the LPT first?)

Bizarrely, the legislation also obligates a buyer who has reason to believe that the LPT, as declared by the seller, is too low and was not “a fair and honest valuation”, to report their concern to the Revenue.

This “snitch” clause, as it has become known, can only really be triggered if the new purchase price pushes the house into a higher tax band. For example: the property is LPT valued for the first time on May 7, 2013 at €300,000. On July 7, 2015, the new owner pays €375,000, pushing the property into the next, higher tax band. If the purchase doesn’t trigger a higher tax band, the new buyer pays the same LPT until the next valuation term and has no reason to make a new valuation submission and continues to pay the same LPT until November 2016.

A new owner couldn’t possibly know how or the seller came up with their original valuation back in May 2013. All they can know is why they were willing to pay a higher price for the property, months or years after the previous valuation date.

However, if the Revenue also decide, on foot of a notice by the new buyer that the original declaration was “too low” and is now higher, they have the power to pursue the seller for the tax shortfall from 2013.

“The only reason why Revenue are in charge of property tax valuations and collection,” Karl Deeter of Irish Mortgage Brokers and Advisors told me last week, “is because everyone is afraid of them. No one is afraid of the local authorities.”

So that pretty much sums up any chance of avoiding this tax, or even delaying its payment.

The Revenue, in their deadpan fashion, insist that the LPT is a self-assessment tax, despite including their own valuation with the declaration form (rather than just providing guidelines on how to come to a valuation) plus warnings of dire consequences if you submit a lower valuation with which they may challenge at any time.

The government is probably hoping everyone will be too intimidated to challenge the Revenue valuations.

They could be right.

But if you believe that you are better placed than the Revenue to come up with a “fair and honest” valuation of your property, and you are courageous enough to challenge the Revenue valuation, next week’s column will look at many different methods and sources you can use to achieve that valuation.

And if any of these should provide a higher valuation than the Revenue one, you can, perversely, still opt for theirs’.

jill@jillkerby.ie