Local Property Tax Bulletin 3: Next Steps and Key Actions for Advisers
In previous bulletins on the LPT, we sent you information on the Sample LPT Return and Revenue’s updated Guidelines. We also provided you with information on certain clarifications provided by the Chairman of the Revenue Commissioners in an appearance before the Public Accounts Committee. Today we are giving you more detailed information on:
- The key LPT issues for advisers to be aware of,
- The important stages in the LPT compliance process, and
- The essential actions for you, as adviser, to take at each stage.
Revenue are due to issue LPT Returns and Guidelines to property owners in the coming weeks and early preparation is essential in dealing with this new tax.
Key issues to be aware of
1. Crossover between personal/business taxes: Self-employed taxpayers should not compartmentalise their personal and business taxes when it comes to the LPT. There are important consequences for taxpayers who are in business if the LPT on their residential property is not paid. These include a potential income tax surcharge, possible withholding of tax refunds to cover the amount of unpaid LPT, and also potential implications for tax clearance certificates.
2. Role of advisers:
The LPT will be operated through an online application which is independent of ROS and is not linked to the adviser’s existing ROS digital certificate. It is the property owner, and not the tax adviser, who will receive LPT communications from Revenue and the adviser will not be copied on communications relating to clients’ LPT obligations. When the online LPT system goes live, taxpayers who are themselves registered on ROS will be able to access the new system via a link on their My Services page in ROS or via the Revenue website www.revenue.ie.
Someone other than the taxpayer can file the LPT Return on the taxpayer’s behalf. This could include a family member or other person and that would not displace your position as adviser on other taxes. Alternatively, you may choose to complete the return on behalf of the taxpayer.
3. Dedicated Online LPT System:
The LPT Return issued by Revenue will include a Property ID and PIN which, along with the taxpayer’s PPSN or tax reference number, can be used to access the LPT on-line system. Alternatively, the ROS user can access the LPT on-line system using the link on their My Services page in ROS. The taxpayer will be presented with details of the taxpayer’s properties and the Revenue Estimate of LPT liability for each property. The Revenue Estimate is not based on a valuation of each owner’s individual property nor should it be regarded as an accurate calculation of the amount of LPT that they should pay. However, if the property owner considers that the amount shown on the Notice of Estimate accurately reflects his or her self-assessment, he/she should complete the Return on that basis, select a payment option and submit the Return.
4. Two key concepts: ownership and valuation: 1 May 2013 is the key date for determining ownership and valuation.
- Ownership: In most cases the ownership of the property will be clear. However, there will be situations where it is more difficult to establish ownership, for example where there is joint ownership, property held by a trust or where property has passed by inheritance. Revenue’s Guidelines contain guidance on establishing ownership in these circumstances.
- Valuation: The property valuation on 1 May 2013 will apply for the purposes of the LPT liability for the years 2013-2016.
5. The LPT Return: It is very important to remember that the LPT Return must be filed in May (before the tax is paid in July). Failure to file the LPT Return in May will result in Revenue enforcing their Estimate.
6. Centralised Revenue Branch: Revenue will administer the LPT from a centralised LPT Branch in Ennis, rather than through the district structure.
7. NPPR Charge: Don’t forget that the NPPR Charge continues to apply for 2013. Liability for the 2013 charge depends on the ownership and status of the property on 31 March 2013 and the charge must be paid by 30 June 2013 to the LGMA or Local Authority.
8. Companies: The LPT applies equally to residential properties held by companies.
The LPT Compliance Process
Below is an outline of how Revenue plan to administer the LPT this year.
Important: Please note that some details of this process are currently being finalised by Revenue and further information will be released at a later date.
1. Issuing of Returns
During the 4-week period commencing on 11 March, Revenue will begin sending out the following to households:
(a) The LPT Return (sample here)
- 2 pages long
- Contains a Property ID and a PIN number – required to access the online LPT system
- Separate section for agents (i.e. anyone acting on behalf of the taxpayer) to identify themselves as such
- Section for selection of preferred payment option
(b) The Revenue Guidelines (copy here)
- Contain guidance on valuing your property, calculating the self-assessed LPT, completing the LPT Return and selecting an appropriate payment option
- Further property valuation guidelines will be available at www.revenue.ie from March, and this will include an online guide providing indicative property values.
(c) The Revenue Estimate
- Despite several contradictory reports, the Revenue Estimate is not a valuation of the property and is not to be relied upon as an accurate calculation of the LPT liability.
- LPT is a self-assessed tax and the onus is on taxpayers themselves to value their properties in accordance with Revenue’s valuation guidelines and to calculate their LPT liability accordingly.
2. Filing of Returns
The deadlines for filing the LPT Returns are 7 May 2013 for paper LPT Returns and 28 May 2013 for electronic LPT Returns.
- The following taxpayers must file the LPT Return online:
- Taxpayers owning more than one residential property,
- Taxpayers who are already required to submit tax returns online under
mandatory e-filing, and
- Companies who own residential properties.
- Where a property is in joint ownership, the owners must designate one person who will file the LPT Return.
- If the LPT Return is not filed on time, or if an incomplete Return is filed (e.g. no payment option is selected), the Revenue Estimate will be enforced very quickly. This means that taxpayers will quickly receive a letter from Revenue informing them that their employer has been instructed to deduct the amount of the Revenue Estimate from their salary. These deductions will be phased in accordance with taxpayer's salary payment schedule.
- A Notice of Assessment will not issue unless Revenue opt to challenge the LPT Return which has been filed. An assessment can also be made where a self-assessment or Revenue Estimate has not been made.
3. Payment of LPT liability
- For taxpayers who opt for payment via deduction at source from salary or occupational pension, Revenue will issue revised P2Cs to employers or pensions providers during June 2013, and phased deduction at source will commence from 1 July 2013. For those who opt for payment via deduction at source from certain payments received from the Department of Social Protection or the Department of Agriculture, Food and the Marine, Revenue will issue an instruction to the relevant Department and phased deduction at source will commence from 1 July 2013.
- As noted above, where the LPT Return has not been filed by the due date, employers will be instructed to begin deducting the amount of the Revenue Estimate from the employee’s salary without delay.
- Commencement of payment via direct debit will begin on 15 July 2013 and payment via Single Debit Authority will be deducted on 21 July 2013.
Immediate Actions for you as Adviser
1. Actions beginning now
- Acting as adviser: Communicate with clients to determine whether they require you to act as agent in relation to filing the LPT Return.
- Engagement letters: Where a client requests you to act as their agent for the purposes of the LPT, you are advised to review the terms of your engagement letter. The Irish Tax Institute is updating its engagement letter guidelines to assist with this.
- Self-employed clients: Ensure that these clients understand the crossover issues between personal and business taxes in relation to the LPT. These include a potential income tax surcharge, withholding of tax refunds to cover the amount of unpaid LPT, and also implications for tax clearance certificates.
- Clients as employers: Ensure that clients who are employers are aware that they may be obliged to operate the LPT through payroll. This may require early engagement with software providers to ensure systems are prepared for deduction at source to begin on 1 July 2013.
- Overseas clients: Communicate with overseas clients who have Irish residential property, including holiday homes and properties managed by letting agencies. Ensure that they have arrangements in place whereby all LPT communications from Revenue will reach them.
- Ownership issues: If you have reason to believe that a client may be the beneficial owner of a home but is not recorded as the registered owner, this is likely to emerge as part of the LPT compliance process. Historical issues in relation to previous transfers of the property may need to be considered.
- Exemptions/deferrals: Familiarise yourself with the specified exemptions and deferrals relating to the LPT and the relevant conditions to be satisfied.
2. Actions when the LPT Returns are issued
- Engage early: Ensure that clients are clear on where responsibility lies for filing the LPT Return. Where a client requires you to act as agent, you will need to build this in to your compliance process.
- Valuations: Ensure that clients understand how to self-assess the value of their properties and, if they wish to do so, advise them to engage early with a professional valuer.
- File the LPT Return: Filing deadlines must be strictly adhered to, as Revenue will take very swift action where LPT Returns are not filed on time.
3. Actions after LPT Returns have been filed
- Payment: Where a payment option other than deduction at source has been selected by the client, ensure that payment is made by the due dates outlined above. Where clients, as employers, are obliged to deduct LPT for the employees at source, ensure that they have appropriate procedures in place to put this into effect from 1 July 2013.
Future bulletins in our LPT series will deal with specific issues which are most relevant for:
- Employers, and
- Self-employed taxpayers.
Please refer to our dedicated webpage for all of your LPT resources in one place. If you have any queries or feedback on the LPT, please contact either Cora O’Brien (firstname.lastname@example.org) or Deirdre Daly (email@example.com).