What happens if purchasers find the seller undervalued the property for LPT?

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Bronte

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What happens in Year 2020 and revenue decides that property x was undervalued in the years 2013/2014/2015/2016. Or conversly what happens if the property was overvalued. Revenue and the Law Society need to get that sorted as well.
 
What happens in Year 2020
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I think that the Revenue will get to the undervaluations long before 2020. Their priority for this cycle of the LPT is to get everyone registered and paid. I presume that they will produce some sort of exception report which will throw up sales of houses more than [30%] in excess of the LPT valuation and they will write to those sellers and ask them to justify the value they used. This would not be an issue for the Law Society.
 
Bronte said:
No, but it would be a VERY big issue for purchasers. The tax runs with the property.
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When you buy a property, you should fill in an LPT4 form, which gives you the opportunity to revise the valuation as of 1 May 2013.

So if you buy a property today for €500k which the seller valued at €250k six months ago, you should put in a value closer to the purchase price. In fact, it will probably not cost you anything to do this as you will be exempt for the next three years as long as it continues to be your PPR.

Brendan
 
Brendan Burgess said:
When you buy a property, you should fill in an LPT4 form, which gives you the opportunity to revise the valuation as of 1 May 2013.

So if you buy a property today for €500k which the seller valued at €250k six months ago, you should put in a value closer to the purchase price. In fact, it will probably not cost you anything to do this as you will be exempt for the next three years as long as it continues to be your PPR.
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Yes one could go back currently and modifiy the LPT for say 2013 if purchasing now. That's not the problem, lets say the owner undervalued for 2013 (and so 2014/2015/2016) and a purchaser buys in 2020 and revenue decides in 2020 that the 2013 was way undervalued. That's the problem. It's because the LPT is based on what people decided themselves the value was, and we know for sure that people have contrived to undervalue. It would be different if revenue/the government had decided the values.

Would the owner than in 2020 not only be liable for the LPT increase from 2013 but also a surcharge on all taxable income, or would the original owner be liable. Bearing in mind it's a tax that runs with the property.
 
It's an interesting point.

To the best of my knowledge, the purchaser's liability is to make sure that the seller paid the LPT.

Certainly, in 2020, they won't need to review the 2013 valuations.

The next valuation date is 1 November 2016 I think. (Though I suspect that will be moved to 1 Jan 2017) . That will cover 2017, 2018 and 2019. Not sure if it covers 2020.

I don't think that you will ever by liable for the seller's undervaluation, but you can't buy unless they have paid. Revenue would have to chase the seller.
 
I sold a property a few months ago and it went for more than we ever expected. I called the LPT office to see about paying thee additional tax and I was told that once I had submitted the valuation in what I honestly believed was a realistic valuation as of the 1st of May then that was fine. The house sold about the time of the rising prices in the Dublin area and there were 3 vey keen buyers.

I probably should have gotten something in writing.
 
Why on earth would the LPT office offer something in writing to a random caller? Property valuations are ten-a-penny, especially in CAT & CGT returns, the sky doesnt fall when properties are later sold at different values. A valuation is nothing more than an opinion on a given day. Once a valuation is informed, fair and is capable of being defended by reference to evidence (condition of property etc), there is no issue.
 
T McGibney said:
Property valuations are ten-a-penny, especially in CAT & CGT returns, the sky doesnt fall when properties are later sold at different values.
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But aren't valuations for CAT & CGT based on a certificate from a valuer/auctioneer? Wheras LPT is based on an owners guess/best opinion/false valuation.
 
Ideally so, but there's actually no obligation on a CAT or CGT taxpayer to obtain an independent valuation. The only obligation is to specify & use the actual open market value, which is exactly the same as applies to LPT. And anyway, if the householder feels their valuation is justified, what's to stop them obtaining a retrospective valuation to either confirm or debunk their own figure?
 
T McGibney said:
And anyway, if the householder feels their valuation is justified, what's to stop them obtaining a retrospective valuation to either confirm or debunk their own figure?
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That's a good idea, so if you have a revenue query in 2020, you could get an auctioneer to give his expert opinion of the value in 2013. Ok for that, if it matches.

What about the scenario when someone put themselves in Band 1 and it should have been band 4, and in 2012 and 2013 and 2014 similiar properties sold at a price in band 4. Based on the property price registrar, and revenue decides in 2020 they are now going to go back on historical valuations that are suspect.
 
If they deliberately underpaid, or made a genuine error, they have a liability and must rectify this.

If they had a good reason why they selected a particular valuation band which retrospectively looks iffy, they can simply communicate this to Revenue (for free), or to a valuer, who (for a fee) will communicate this to Revenue on their behalf.

It's really that simple. (If it wasn't, the CGT & CAT self-assessment systems would grind to a halt).

And materiality means that there will always be tolerance for a certain level of error.
 
T McGibney said:
A valuation is nothing more than an opinion on a given day. Once a valuation is informed, fair and is capable of being defended by reference to evidence (condition of property etc), there is no issue.
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Yes, there is no issue where a valuation is informed, objective and based on documented evidence.
 
ajapale said:
Yes, there is no issue where a valuation is informed, objective and based on documented evidence.
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I see revenue have now come around to examening the valuations

http://www.independent.ie/business/...geted-in-property-tax-clampdown-30080438.html

Love this bit in particular

the computer programme allows the taxman to highlight properties which are valued significantly lower than neighbouring buildings. The maps show the average value of homes sold on the street and the value of each home as submitted to Revenue by the owner.

The average value of homes sold on the street, are you all living in streets where lots of homes have been sold? Or plenty of houses sold, or one house sold?

The good news is that you can still, without penalty, change your valuation, if necessary.

They are also going after the half a million people who didn't pay the €100 household charge. No mention of the NPPR but we discussed that on a different thread.
 
It will be interesting to see how they deal with a road of houses where all agreed to nominate a lower price.

I know of one person where everyone on the road agreed to a significantly lower price - there are about 14 houses on the road. There have been no house sales on the road for about 10 years and everyone put in for a valuation of €250-300k whereas in reality their houses would be at least double that.

The software Revenue have seems to highlight single houses which were undervalued rather than a group of houses. I think they are hoping to get away with it as there is an estate beside them which would carry the lower price (they are small 2/3 bed terrace as opposed to large detached 4/5 bedroom houses in a Dublin suburb)
 
sam h said:
I think they are hoping to get away with it as there is an estate beside them which would carry the lower price (they are small 2/3 bed terrace as opposed to large detached 4/5 bedroom houses in a Dublin suburb)
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This may be a generalisation but people who bought over 10 years ago living in a 4/5 bed house would i would imagine be on the slightly more affluent side of society. Or at the least be a group of less affected people of recent times. Why would they take the risk and conduct such orchestrated tax fraud for the sake of a few hundred euro a year. Why would people go to that risk??
 
sam h said:
I know of one person where everyone on the road agreed to a significantly lower price - there are about 14 houses on the road. There have been no house sales on the road for about 10 years and everyone put in for a valuation of €250-300k whereas in reality their houses would be at least double that.
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There can't be too many neighbourhoods nowadays where 14 adjoining neighbours know and trust each other sufficiently well to participate in such a conspiracy.
 
I would agree they are taking a stupid risk for a small saving - the houses are there for over 35 years and there has been very little movement (as I said only one house sold 10 years ago).

I am not advocating what they have done & knowing the person in question, it may have been all talk, but after the tax was paid he told his son that is what all the neighbours agreed to. They could easily have afforded to pay it.
 
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