Claiming an exemption from property tax? Now you must prove it

The Revenue has written to homeowners who purchased a property in 2013 asking them to verify that they should be entitled to an exemption from local property tax on the basis that they purchased the property that year.

Some 11,500 homeowners in this cohort have been enjoying an exemption, known as section 8, from the tax since this date – thus saving themselves thousands of euro. The exemption was introduced in 2013 to stimulate demand among first-time buyers, but was subsequently extended to all buyers in that year.

The exemption is due to end this year, which means that such buyers will find themselves subject to the tax for the first time from 2020, when a new valuation date is due to be introduced.

However, ahead of this, the Revenue is seeking to verify that exemptions have been claimed appropriately, and is asking homeowners to verify both the date of purchase of the property, and that it is being used as their sole or main residence since this date. Homeowners have been given 28 days to respond to Revenue with the required documentation.

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According to a spokeswoman for Revenue, while there is “no specific compliance programme” under way to test eligibility for the exemption, confirming compliance is normal Revenue practice .

Those who are found to be incorrectly claiming the exemption could face a maximum penalty of €3,000, although the spokeswoman noted that this may be mitigated to an amount equal to the actual local property tax liability. This would depend on the property owners “quickly getting their LPT affairs in order”. Interest at a rate of 8 per cent also applies in respect of unpaid liabilities.

The exemption

When the LPT was first introduced back in 2013, an exemption was offered for first time buyers (exemption B). This was subsequently extended, on the back of a claim, to all those who bought a home between January 1st 2013 and December 31st, 2013. Those who bought a property between May 2nd and November 1st of that year were not required to pay LPT on the property for 2013 – rather it was the obligation of the vendor, and were exempt from the charge for the years 2014 to 2019. Those who bought in that year, but not between those dates, were obliged to pay the tax for 2013 but are exempt up until 2019.

Purchasers of new homes since then have also benefited from the exemption.

It is understood that some 12,000 homeowners have been claiming that exemption, thus saving potentially thousands of euro over the period. For example, someone living in a €500,000 house in Dún Laoghaire Rathdown would ordinarily have an annual bill of about €803; but if claiming the exemption, they would have saved about €5,621 over the period. Similarly, a homeowner in Waterford with a home worth about €180,000 would have saved themselves about €2,254.

However, there are some caveats; the exemption does not apply to investment properties, while if an eligible property was sold between 2013 and 2019, the exemption would no longer apply to the new owner of the property.