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Local Property Tax: Will Revenue chase me over rising home value?

Q&A: Homeowners have nothing to fear as long as they can show valuation submitted for tax in late 2021 was fair

25/03/2013 News / Archive The Local Property Tax forms sent out by Revenue . Photograph: Bryan O'Brien / THE IRISH TIMES Keywords : tax lpt revenue finance home house ownership liability lpt declaration form signature tax customs payment recession euro business finance penalty fine market value residential landlord estate local authority lease property paperwork papers
Rising property prices since November 2021 will have no impact on your local property tax bill. Photograph: Bryan O'Brien
Dominic Coyle's picture
Dominic Coyle
Tue Feb 07 2023 - 05:00

Using Revenue’s own online calculation tool, I registered for local property tax in November 2021. My understanding is that the amount of tax liable for my house is set until 2024.

My concern arises from the fact that house prices in my area have risen considerably since 2021. Based on a recent professional valuation, I would fall into a higher valuation band today. So on paper the value of my asset makes me wealthier even though this is not the case in reality.

I imagine this must be a common phenomenon given the current state of the housing market. What is the general advice on this? Should I stick with paying tax on the value I set in 2021 or do I then risk arrears when my LPT liability is next due to be calculated?

Ms M.M., Cork

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People worry a lot about local property tax (LPT) valuations and it is not helped that it has, to some degree, become a political issue.

Data recently published by the Revenue Commissioners shows that, at that most recent valuation in November 2021, almost two-thirds of homeowners filed returns valuing their properties in line with Revenue assessment for those homes – with almost everyone else going up or down by no more than one band.

As you say, the expectation is that those valuations will determine the local property tax you pay on your home from the start of last year until the end of 2025, not 2024.

The bottom line is that you have nothing to worry about if your November 2021 valuation was based on the fairly assessed value of your home. You continue to pay tax based on the fair November 2021 valuation. You only become liable to taxation at a higher band at the next renewal date in 2025 or any later date to which it might be deferred, and there should be no retrospective charge for LPT.

There are two scenarios where Revenue might get involved.

First, as they did under the previous 2013 valuations, they reserve the right to challenge your assessment. If you have agreed with their valuation, this will not happen, but the Revenue guideline would have been based on the average property value for that area, not on the actual value of your specific home. It might be that the property is smaller than most other properties in the surrounding area – or larger.

If you have submitted a valuation below the figure suggested by Revenue, it would be important to keep a copy of the information on which you based your assessment. This could be an actual individual valuation from November 2021, though this is not a cost most people will have chosen to incur, and it is not required. You can also cite the prices sought or secured by similar properties in your area in and around that November 2021 period.

This is particularly the case for that 3 per cent of homeowners who submitted an LPT valuation that was two or more bands below the Revenue assessment.

As long as Revenue is comfortable that you had a reasonable basis for your valuation, there is no problem. But when you say you chose what you believed was the correct valuation band, you will need to have some evidence to back that up if it differs from the Revenue guidance – assuming they challenge you at all.

The second time it may raise its head is if you sell the property before 2025. As part of that process, Revenue LPT clearance is required. This is normally routine but where there is a big discrepancy between the sale price and the LPT valuation, issues can arise.

Revenue sets out guidance on the LPT clearance procedures on the sale or transfer of residential properties on how purchasers can be comfortable that they won’t face a charge for “uncrystallised” local property tax liabilities.

As long as any of the following conditions are met, there will be no grounds for concern for the purchaser:

  • The property sells for less than €350,000;
  • The property sells for 50 per cent more than the upper limit of the valuation band submitted by the homeowner in 2021 (or 80 per cent in Dublin);
  • The property has been enhanced since valuation but the sale price exceeds the top of the valuation band by no more than the verifiable cost of the that work (ie receipts) plus the 50 per cent/80 per cent allowance mentioned above;
  • Original valuation was submitted on the back of recent sales of comparable properties.

Revenue still reserves the right to pursue the vendor for anything it believes they may owe due to under-declaration of valuation in advance of the sale but clearly if you can show your valuation was either in line with Revenue guidance or backed by evidence, you will be fine.

The bottom line is that you have no need to worry as long as your November 2021 valuation was accurate at that time. The fact that prices have risen since then is of no relevance and you do not need to amend your valuation until the next formal valuation date.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice

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