Olivia Mitchell (Dublin South, Fine Gael)
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215. To ask the Minister for Finance if there is a legislative requirement to pay the difference in local property tax should the sale price of a property turn out to be more than one band above the declared value, as it appears vendors are now being charged for such a difference in value for both 2013 and 2014; and if he will make a statement on the matter. [33395/14]

Michael Noonan (Limerick City, Fine Gael)
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The Finance (Local Property Tax) Act 2012 (as amended) sets out how the tax is to be administered and how a residential property is to be valued.  For Local Property Tax (LPT) purposes, the market value of a property on 1 May 2013 is valid for 2013, 2014, 2015 and 2016.

Recent media coverage associated with increasing sales prices in the property market, particularly in certain locations, seems to have sown doubt in the minds of property owners about how these increases impact on their property's valuation for LPT purposes and I am pleased to have the opportunity to clarify the matter for the Deputy and the House.

I am informed by the Revenue Commissioners that the valuation band/valuation for a property declared by the owner for LPT purposes based on its 1 May 2013 market value will not be affected by any general increase in the value of properties in the period between 2 May 2013 and 31 October 2016.  As Revenue has made clear at all times, provided the 1 May 2013 declared valuation band/valuation was made in good faith by the property owner based on information available from a variety of sources recommended by the Commissioners, that valuation band/valuation would remain unchanged until 31 October 2016.

I am also advised that in order to ensure that the sale of residential properties is not delayed because of LPT, I am advised that the Revenue Commissioners have put processes in place to assist anyone selling or buying a property satisfy themselves that all LPT requirements have been met.

Outstanding LPT Payments & Returns must be dealt with prior to Sale

The amount of LPT due is based on the declared valuation band/valuation. The LPT liability (including household charge) crystallises on the sale of a residential property and must be paid in full either in advance of the sale or must be deducted from the proceeds of the sale. In addition, any outstanding LPT Returns must be submitted to Revenue. Before any sale, the seller, or their solicitor, can log-on to Revenue's LPT online facility and satisfy himself or herself that there are no outstanding LPT issues.

Process where sale price of property exceeds declared valuation for LPT

As the declared valuation band/valuation at 1 May 2013 applies for LPT purposes right up to the end of 2016, a person selling a residential property is required to provide the buyer with details of the valuation band/valuation that they declared so that the buyer can meet their LPT obligations in respect of their newly acquired property. 

It should be very clear to the purchaser and his/her advisers in most cases, whether the appropriate valuation band/valuation was used by the previous owner.  However, where the price sought by the seller exceeds the valuation band/valuation declared at 1 May 2013, a purchaser may have concerns that they will be left with a residual liability because the seller under-declared the valuation at the valuation date.

Prior to a sale, the person selling the property (the vendor) can obtain clearance from Revenue to prove that there are no outstanding LPT issues. In most cases, clearance can be obtained by accessing the LPT online system.  To avoid unnecessary administrative burden, Revenue has stated that where the sales price of the property is greater than the declared valuation band/valuation at 1 May 2013, there will be no need to obtain written clearance from Revenue where any of the following conditions are met:

The sales price is within the following "allowable margins":

In the case of the first five valuation bands ( i.e. properties with a declared chargeable value of up to €300,000), where the sales price falls into the valuation band immediately succeeding the band that was declared;

In the case of the remaining fourteen valuation bands, where the sales price is not more than 15% higher than the upper limit of the band that was declared; and

In the case of properties where the declared chargeable valuation exceeded €1m on 1 May 2013, where the sales price is not more than 15% higher than the declared valuation.

Where the increase in the property's value is due to improvements/repairs carried out by the vendor after 1 May 2013, the above allowable margins can be adjusted to take account of the cost of the improvements/repairs.

Where the vendor based the declared valuation band on the known and verifiable sales prices of comparable properties in the area and the vendor has evidence of at least one comparable property sold within the period of six months prior to 1 May 2013. 

Where none of these conditions are met and the declared valuation band/valuation at 1 May 2013 was made in good faith, the vendor should apply for written clearancefrom Revenue by completing and including relevant supporting documentation. Revenue will review the basis for the declared valuation band/valuation and determine whether clearance should issue. Where Revenue is satisfied that the valuation band/valuation declared by the vendor was reasonable, clearance will be provided. 

However, where Revenue is not satisfied that the declared valuation band/valuation was reasonable, the vendor will not obtain clearance and will be liable for an additional LPT charge, and possible interest and penalties, on the property on foot of a Revenue assessment. 

The Commissioners have confirmed that further information is included in Section 4 of the which were prepared by the Revenue Commissioners in consultation with the Law Society and are available on the Revenue website and on the Law Society's website. 

Revenue is currently reviewing these guidelines to take account of increases in property values in certain locations since 1 May 2013 and will be consulting with the Law Society in that regard.

In conclusion, if a vendor selected a valuation band in good faith in line with comparable valuations on 1 May 2013 and sells the property for a higher value in 2014, 2015 or 2016 no additional LPT liability arises. If the vendor selected a valuation band for the property that did not reflect the market value then he or she should self correct the valuation band before finalising the sale.