In his second Budget Statement for 2009, Minister Brian Lenihan advised that a new €200 charge on residential properties would be introduced to help finance local authorities. The Local Government (Charges) Act 2009 (the “Act”) gives effect to this intention and was signed into law by the Minister for the Environment, Heritage and Local Government on 24 July 2009.
As promised, the Act provides for the payment of an annual charge of €200 (commonly referred to as the “Non Principal Private Residence Charge”) in respect of residential properties by the owners of such properties. The revenue from the charge will flow to city and county councils, providing a revenue stream to local authorities for the first time since the abolition of domestic rates in 1977.
As the payment date for the charge approaches, it is worthwhile reviewing the legislation to ensure that everyone liable to pay the charge is aware of their responsibility to do so. The scope of the Act is more far-reaching than the name to which it is commonly referred would imply and, in particular, it is worthwhile noting that the definition of “owner” in the Act encompasses not only individuals who own property in their own right, but also executors, legal personal representatives, trustees and agents.
The Act introduced a €200 annual charge on every person who is the “owner” of a residential property on the “liability date”. In the case of co-owners, they are jointly and severally liable and payment by either one of them will discharge the liability of each of them.
Whilst the Act does not use the term "non principal private residence", it exempts from the charge any property which is the "sole or main residence" of the owner.
An “owner” is defined in the Act as any person who, in their own right or as a trustee or agent, is the person entitled to receive the rent of the property or, where the property is not let, would be so entitled. This definition is far reaching. For example, it includes executors where there is a residential property in the estate (this is so even where the residential property was formerly the sole or main residence of the deceased person). It also includes trustees where there is a residential property in the trust (although, as can be seen below, there is an exemption in respect of residential properties comprised in discretionary trusts). Interestingly, in the case of a life interest trust, it is the life tenant who is entitled to derive rent from the property and not the trustee. Accordingly, it is the life tenant who is the “owner” for the purposes of the Act.
The Act provides for the following exemptions from the charge:
- As mentioned above, where the residential property is occupied by the owner as his/her sole or main residence.
- A “room” under the rent-a-room scheme is not considered a residential property for the purposes of the Act. However, the building of which it is part remains a residential property and the charge will apply in respect of that property unless the owner resides there as his/her sole or main residence.
- Where the residential property is comprised in a discretionary trust.
- Where the residential property is owned by an approved charity.
- Where the owner owns two properties, the second having been acquired within one year of the liability date and the first is sold no later than six months after the liability date. This provides a similar grace period as applies for Capital Gains Tax purposes where an individual is moving house.
- In certain circumstances after a divorce or separation, a spouse who is a joint owner will not be liable to pay the charge where the property is occupied by the other joint owning spouse as his/her sole or main residence.
- Where the residential property is owned by a person who lives elsewhere by reason of being incapacitated by long term mental or physical illness. For example, where an elderly person is living in a nursing home, he/she will not be liable to pay the charge in respect of his/her former home.
- Where the residential property is occupied free of rent by a person who is a relative of the owner of the property provided the said residential property and the sole or main residence of the owner are located on the same property or within 2km of each other. This exemption covers “granny flats” and similar dwellings in which a relative (or a relative of a spouse or partner) lives rent free.
- A newly constructed residential building that is unsold and has not yet been used as a dwelling provided it forms part of the trading stock of a business (this applies to property developers).
- A residential property occupied under a shared ownership arrangement with a housing authority or a building let by a housing authority, voluntary housing body or the HSE.
Dates and penalties
Liability for the charge shall arise for the owners of qualifying residential property on a set date in each year known as the ‘liability date’.
For 2009, the liability date is 31 July 2009. An owner of qualifying residential property on this date will be liable to pay the charge by 30 September 2009.
From 2010 onwards, the liability date shall be 31 March of each year and an owner will be liable to pay the charge by 31 May each year.
The Act provides for a grace period of one month for late payment so that if payment is not received by 31 October 2009 or, from 2010 onwards, by 30 June of that year, a €20.00 late payment fee will apply in respect of each month, or part of a month during, which the charge remains unpaid.
A person who fails to pay the charge will be guilty of an offence and the Act provides for further penalties in this regard. Furthermore, the unpaid fee remains a charge on the property itself. Click here to view table
The charge is payable to the Local Government Computer Services Board on behalf of the city or county council in which the property is located. The charge can either be paid electronically via the website at www.nppr.ie or by bank draft, postal order or cheque.
Finally, when the charge is being paid, each chargeable property must be registered by completing the NPPR1 form giving the following details:
- Name of the owner of the property;
- Address of the property;
- Address for correspondence of the owner of the property;
- Personal Public Service Number of the owner of the property in the case of a private ownership; and
- Tax reference of the owner where the owner is a company.
This form can also be completed on-line at www.nppr.ie. A letting agent may complete the form on behalf of the owner.
THE FUTURE OF THE CHARGE
The Commission on Taxation Report, published on 7 September 2009, recommends the introduction of an annual property tax on all residential property to be calculated by reference to the value of the property.
It is recommended that the annual property tax should initially be a national tax but should, over time, become a source of local government financing, replacing the €200 charge.
Accordingly, if the Commission’s recommendations come to fruition, the €200 charge on residential property is likely to be replaced by a more significant tax on residential properties. However, for this year at least, the €200 charge applies and will have to be paid by all “owners” of residential properties.