Q&A - Personal Finance - Dominic Coyle

What is property tax liability of life tenants?


Could you direct me to the section in the Local Property Tax legislation dealing with Life Tenants ? a) Are they (life tenants) responsible for the property tax on the apartment they inhabit given that they are life tenants, and have lived already over 20 years in a house rented out to other “regular” tenants, plus; b) Will their life tenancy, which normally affects valuation of said property , be taken into consideration when the Revenue values the house?

Ms A.C., email

According to my reading of the Local Property Tax Act 2012, Section 11, subsection 3 (d) under Part 3 of the Act, which governs liable persons, is the relevant area.

Subsection 3 states: “Without prejudice to subsections (1) and (2), the following persons shall, for the purposes of this Act, be liable persons in relation to a relevant residential property”.

Going down to 3(d), you find reference to: a person having an exclusive right of residence in the property for:

(i) his or her life or the life or lives of one or more others, or;

(ii) a period that may equal or exceed 20 years.

I’m no expert in life tenancies but it does appear that regardless of other circumstances, if you are deemed a life tenant, or have a life-interest in the property, you will be liable.

In its frequently asked questions document, the Revenue explains the liability as belonging to anyone who is a “holder of a life-interest in a residential property and persons with a long-term right of residence (for life or more than 20 years) that entitles them to exclude any other person from the property”.

As a general rule, I understand that a person holding a life tenancy is responsible for taxes on the property during the period of the tenancy.

On your second point, the Revenue is not valuing the property, you are. The legislation states that the Local Property Tax works by way of self-assessment. It is up to you to give your best estimate of the true value of your home. I assume that would include any provision for a reduction in value that might apply because of the life tenancy. If Revenue believes the valuation is out of kilter with surrounding properties or its assessment, it may challenge your assessment. So be confident of your assessment. Experience to date suggests that its assessments have tended to the lower end of the scale.

USC income thresholds for over-70s
Income “thresholds” for austerity cuts are in proposals for Croke Park 2 . However the Universal Social Charge

included in the recent Finance Bill for the “over 70s” appears to ignore any thresholds. All elderly persons whose income is over €60,000 to be charged at 7 per cent. This compares with those on an income of below €60,000 being charged at the original rate of 4 per cent. Allowing for the first €16,016, in both cases, being charged at lower rates, the pensioner with an income of €60,001 – compared with an income of €59,999 – will pay an additional USC of €1,320 in 2013? Can you confirm?

Mr C.F., Dublin

Clearly, the change in the last Budget on USC will hurt those at or close to the threshold. However, it’s not true to say there are no thresholds.

What has happened is that the “reduced” rate formerly applying to all income of people over the age of 70 is no longer in place if that person’s income is over €60,000. Bear in mind that any social welfare payment (such as a contributory State pension) is discounted in assessing income, as is any deposit interest on which DIRT has already been paid.

The Government has explained the move in the context of trying to spread the pain of austerity fairly across all categories. There is a view that pensioners have fared less badly in the cuts of recent years than others.

The Government would also argue that someone with retirement income of €60,000 should hardly be paying USC at a rate lower than a family with income of just €20,000 or €30,000. The issue always was at what point the reduced rate should expire and whether a transitional arrangement should be made so as not to disadvantage those close to but above the new threshold.

There are not many who would argue that the cut-off point is not unreasonable. On the second point, the Government decided against a phased arrangement which would introduce added complexity.

You refer to thresholds in relation to Croke Park 2 and the Local Property Tax. On the latter, there is no income threshold – only an ability to defer payment. There are €50,000 bands within which valuations can be made and also a €1m threshold above which a higher property tax rate applies. On Croke Park, I understand that there is a sliding scale for pay cuts but, unless I am wrong, the threshold at which people are deemed to be able to take some pain is around €65,000, which is not very different from pensioners and USC.

This column is a reader service and is not intended to replace professional advice. Please send your questions to Q&A, c/o Dominic Coyle, The Irish Times, 24-28 Tara St , D 2, or to dcoyle@irishtimes.com.