Key Post Anyone who buys a home in 2013 is exempt from LPT until 2017, not just First Time Bs

Brendan Burgess

Brendan Burgess

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This is what the Revenue website says about Exemptions

Certain properties will be exempt from LPT.

  • New and previously unused properties that are purchased from a builder or developer between 1 January 2013 and 31 October 2016 will be exempt until the end of 2016.
  • Properties purchased by a first time buyer between 1 January 2013 and 31 December 2013 will be exempt until the end of 2016. The exemption is subject to certain conditions, including that the property must be the person’s sole or main residence. If the property is subsequently sold or ceases to be the person’s main residence between 2013 and 2016, the exemption no longer applies.
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But check out the Revenue Operations Manual

[2. 7] First-time buyers

1. Introduction

This exemption from local property tax (LPT) applies to residential properties that are purchased by ‘first-time buyers’ who lost out as a result of the termination of mortgage interest relief. However, the effect of an error in the drafting of the legislation is that anybody who purchases a property in the period 1 January 2013 to 31 December 2013 can claim the exemption. Thus, the exemption is not restricted exclusively to ‘first-time buyers’.

Properties bought in the period 1 January 2013 to 1 May 2013 by ‘non first-time buyers’ who filed a return and paid LPT for 2013 as they did not realise that the property was exempt are entitled to a refund of the tax paid. Revenue will be contacting those concerned as soon as possible.
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This will create a headache for many sellers in 2013

If Mary sold a house to John on 1 July.

Mary owned the house on 1 May so she paid the 6 month's liability, say €500.

Most conveyancing contracts apportion the LPT, so John paid Mary €500 extra as part of the closing.

Now it turns out that John had no liability so Mary should give him the €500 back.
 
LPT exemption info from Revenue

I have had an interesting conversation with Revenue re exemptions for LPT. They are insisting that any person who bought a property in 2013 is exempt from LPT until 2017 (or more specifically end of 2016) - there is no requirement for the purchaser to be a first time buyer.

The property must be your PPR and you must not own other properties.

This contradicts the information on the Revenue website. When I challenged them on this point they conferred with a manager and restated that any property bought in 2013 (irrespective of first time buyer status), that is a PPR and the only property owned by the individual, is exempt from LPT until 2017. The contradiction with the website info was raised by me - the reply was that this was "a new thing" and that the website might not yet be updated.

I asked for this in writing. It couldn't be provided but the person on the line gave me their full name and stated that the call is being recorded and that all the information was verified by a manager.
 
Thanks folks

The legislation is complex, and so I can see how it was easy to make a mistake. (To be honest, I don't really understand their explanation of the error).

The surprising thing is that they have known about it since July and they haven't gone public on it. Many people who are exempt have paid the tax unnecessarily and now there will have to be a big refunds exercise.

This could have been avoided if they went public on it as soon as they discovered it.
 
Very good news

Hi Brendan
We bought a house in 2013 and this is very good news for us!
Thank you...
C
 
Brendan Burgess said:
This will create a headache for many sellers in 2013

If Mary sold a house to John on 1 July.

Mary owned the house on 1 May so she paid the 6 month's liability, say €500.

Most conveyancing contracts apportion the LPT, so John paid Mary €500 extra as part of the closing.

Now it turns out that John had no liability so Mary should give him the €500 back.
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Law Society practice notes stated that the amount already paid had to be apportioned, even when the purchaser was exempt, so if John was an FTB he would still have had to pay a portion. Also, it wasn't 6 months liability, it was 12 months but at half rate - ie John would have paid Mary €250, not the full €500.

I wonder whether they will now review this since all purchasers will be exempt?
 
Brendan Burgess said:
This will create a headache for many sellers in 2013

If Mary sold a house to John on 1 July.

Mary owned the house on 1 May so she paid the 6 month's liability, say €500.

Most conveyancing contracts apportion the LPT, so John paid Mary €500 extra as part of the closing.

Now it turns out that John had no liability so Mary should give him the €500 back.
Click to expand...

So this probably means that those selling in 2013 might be hit for a full year's 2014 tax when they might not actually own the property for any part of 2014. This will apply to anyone selling after 1/11/2013 as they will have the tax liability for 2014, and will have difficulty getting it back from the purchaser who has no liability. Surely the revenue must set this right?
 
roland said:
So this probably means that those selling in 2013 might be hit for a full year's 2014 tax when they might not actually own the property for any part of 2014. This will apply to anyone selling after 1/11/2013 as they will have the tax liability for 2014, and will have difficulty getting it back from the purchaser who has no liability. Surely the revenue must set this right?
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This is the situation I find myself in now. Buyers have said they wont entertain refunding me the LPT as they have three years exemption. I won't own the property next year yet am being asked to pay tax for the year. Revenue say I must pay tax as I own the property on November 1st, even though I wont own it in 2014 and no tax is due by buyer in 2014. This is grossly unfair. Will be contacting Revenue on Monday, but does anyone know if this anomaly is being raised on an official level?
 
Hi constellar

Obviously the buyers are correct in not paying you a tax for which they have no liability.

Did you try to get the deal done before the 1 November? Then no one would have had a liability for the tax.

brendan
 
gianni said:
I have had an interesting conversation with Revenue re exemptions for LPT. They are insisting that any person who bought a property in 2013 is exempt from LPT until 2017 (or more specifically end of 2016) - there is no requirement for the purchaser to be a first time buyer.

The property must be your PPR and you must not own other properties.
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Where is the "must not own other properties" bit come from? Bizarre
 
In relation to constellar's situation I simply cannot get my head around the logic of this 1st of November liability date having presumably paid up until 31st of December 2013 why in all reasonableness should they be paying for something that they do not own for any part of 2014.
Constellar will not be receiving any local services in 2014 for the payment?.

On the other side of the argument some people are of the view that where a purchaser is not entitled to the exemption (purchasing a property to let) that they could possibly have to share or apportion the LPT with the seller.

So it could depend on whether you sell to a an exempted person or to a purchaser who is buying to let?

I thought I was getting my head around the LPT.
 
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Does anyone know if you are exempt if you built your own home in 2013 (non first time buyer) and it's your ppr? Thanks.
 
Brendan Burgess said:
Hi constellar

Obviously the buyers are correct in not paying you a tax for which they have no liability.

Did you try to get the deal done before the 1 November? Then no one would have had a liability for the tax.

brendan
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Thanks for your reply, Brendan. The buyers are of course correct for not paying a tax they do not owe, but the real conundrum here is if I am correct in being liable for paying a 2014 property tax in 2013 for a property that I will not own in 2014?
I would have liked the deal to be done weeks ago but waiting for bank to confirm mortgage approval of buyer, and either way no knowledge of this situation by myself or buyer until now. Was it common knowledge before this?
 
Shamrock this may answer your question:

"5.Are new properties that are built by the owner (self builds) exempt from LPT?

If the property has been completed before 1 May 2013, the property will be subject to LPT, unless the person who self-builds the property is eligible for first time buyer exemption and occupies the property as his or her sole or main residence.
Any residential property built by its owner after 1 May 2013 and before 1 November 2016, will not be liable for LPT until 2017."

http://www.revenue.ie/en/tax/lpt/faqs/exemptions.html#section5
 
constellar said:
I would have liked the deal to be done weeks ago but waiting for bank to confirm mortgage approval of buyer, and either way no knowledge of this situation by myself or buyer until now. Was it common knowledge before this?
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It was well known that First Time Buyers in 2013 were exempt from LPT.

It was well known that people who owned a house on 1 Nov 2013 would have to pay the full LPT for 2014, even if they sold it later in 2014.

I suppose the urgency of completing contracts before 1 November if you were selling to a FTB wasn't widely known (i.e. I hadn't appreciated it :))
 
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