The Finance (Local Property Tax) Act 2012 (‘the Act’) provides that the owner on 1st November 2013 is the person liable to pay LPT for 2014 – even if that person sold the property before the end of the year and would not own or occupy the property at any time during 2014.
The Act provides that a sale of a property after the liability date for the 2014 tax (1st November 2013) brings forward payment of the 2014 tax. For sales closing before the end of 2013, therefore, the Vendor would have to pay the tax for 2014 before closing the sale. Revenue has confirmed there will be no refund of the 2014 tax by Revenue to the vendor. [It should be noted that this will be the position every year from now on in respect of all future years for which the tax is due, given that the liability date for the tax for a given year is the 1st November in the preceding year.]
A contract for sale may contain a special condition by which the purchaser and vendor agree that the tax will be apportioned. In such cases, the tax is apportioned in accordance with the contract. Revenue has confirmed that there will be no refund of tax to purchasers who pay apportioned LPT to a vendor.
Because of the publication in early November of the widening of what was previously thought to be an ‘exemption’ only for first time buyers (during 2013 of second hand residential property for owner occupation) to all purchasers of such property during 2013, many vendors and purchasers find themselves in situations that they had not previously anticipated. Insofar as it is possible to give general information on what can be a wide range of complex scenarios, depending on the circumstances of each case, the position appears to be as follows
- In relation to any new contracts now being negotiated, it is likely that a purchaser, who meets the conditions of Section 8 of the Act in relation to the exemption, will wish to claim the exemption from the tax in respect of the years 2014, 2015 and 2016, and will therefore be unlikely to agree to an apportionment. While the question of apportionment is a matter for negotiation between the parties to the contract, if a purchaser refuses to agree to apportionment and the vendor still wishes to continue with the sale, the vendor will have to pay the tax for 2014 before closing the sale this year, even though the vendor will not own or occupy the property in 2014, and will not get a refund of any tax paid.
- In relation to the ‘exemption’ for purchasers (not just first time buyers) of second-hand residential property during 2013 for owner occupation (investors are not entitled to the exemption) – Revenue has confirmed that if these sales do not complete before the end of 2013, purchasers will not be able to claim exemption for 2014, 2015 and 2016. Revenue has confirmed that they will go by the date of completion of the transaction, not the date of the contract, and that they will not entertain claims for an exemption where the closing takes place after 31st December 2013.
- Revenue has confirmed that the only tax that will be refunded is to a purchaser of second hand residential property for owner occupation who bought between 1 January and 1 May 2013 and the amount to be refunded is the amount of the 2013 tax they paid. By virtue of being the owner as of 1 May 2013, this person was the liable person for the 2013 tax. The 2013 tax was paid with this purchaser not knowing that the true interpretation of the Act was that all purchasers of this type were in fact entitled to an exemption in the same way as first time buyers. The 2013 tax paid will be refunded – but only if the purchaser applies to Revenue for a refund and shows that s/he meets the requirements of Section 8 of the Act.