There has been a dramatic increase in the value of property over the past 12 months which is good news for people in negative equity however this is also resulting in home sellers possibly facing an additional local property tax bill.
Under the Revenue guidelines, if a property is sold for 15% higher than the initial return to the Revenue for Local Property Tax (“LPT”) purposes, the vendor may face a Revenue assessment and this new valuation may result is an additional property tax bill for the vendor. This additional property tax bill will also be backdated to the 1st May 2013 which could, in some cases, result in a large property tax bill for vendors.
The Revenue advise that if outstanding tax is not paid before the sale of a property, this tax crystallises which includes the unpaid tax and possible accrued interest and penalties. From a purchaser’s perspective, it is vital that this unpaid tax is paid before closing as any unpaid tax becomes a charge on the property which will ultimately be the responsibility of the purchaser to pay.
If a vendor feels that the initial return to the Revenue was correct, the vendor can apply to the Revenue for a clearance certificate. The Revenue will only provide clearance to sellers if they can show the valuation placed on their property on the 1st May 2013, when the LPT was introduced, was made in good faith and is broadly accurate.
David Walley + Co Solicitors are property solicitors in Dublin who have many years advising clients in conveyancing transactions. Please contact us now for a free consultation.