We’re fielding a lot of questions from interested landlords about a recent high court case which has garnered a lot of coverage in the media, regarding the tax treatment of the now abolished NPPR Charge on second properties.
See an example of that coverage here
So what does all this mean to the typical landlord? Let’s dabble in the detail!
As the years 2009-2012 are over the 4 year limit, landlords will be unable to claim the extra NPPR expenses for these years.
|NPPR (Non Principal Private Residence) is a charge on second and subsequent properties that was in place from 2009-2013 (replaced by household charge, then LPT)|
|NPPR was not allowable as a deduction for Landlords against their tax bill.|
|Recent court case taken by a landlord resulted in a ruling that the NPPR should be allowed as a deduction against your tax bill. Revenue are contesting this in the Court of Appeals, so no change in treatment implemented presently.|
What’s the Impact?
|As the years 2009-2012 are over the 4 year limit, landlords will be unable to claim the extra NPPR expenses for these years.|
|Recommend that Landlords put on file their wish to claim expense for 2013 before the end of this year, but judgement from court of appeals not expected until 2018.|
|With the charge at 200e per property, the impact is limited for most landlords, reducing income tax bills by roughly 40e for standard rate tax payers per property and 82e per property for higher rate taxpayers.|
The Ruling – in more detail
The NPPR Charge
This charge was an annual charge in respect of residential property that was not the owners only or main residence in the years 2009 to 2013. The Non Principal Private Residence charge was introduced by the Local Governments Act 2009 to go towards funding local authority services.
If you owned residential property on the liability date in any of the years 2009 to 2013, and it was not your only or main residence on that date, you were liable to pay the charge of €200. The first liability date was the 31st of July 2009. For each year from 2010 – 2013, the liability date was the 31st of March.
The NPPR charge was abolished in 2013 and was not payable in 2014 or any future year. However outstanding payments are still being collected by local authorities which are subject to sizeable interest and penalties. If no payment is made, a charge is held against the property and this will have to be settled before a transfer or sale can be completed.
The Court Case
In 2013 a Tax Appeal Commissioner found that landlord Thomas Collins could claim tax relief on the NPPR in relation to six Rental properties where the charge applied. That meant Mr Collins could claim relief on the €1,200 annual NPPR charge he faced.
Revenue appealed this decision. Revenue’s case at its core was that a national charge collected locally was distinct from a local authority rate. This would mean that the NPPR was distinguishable from rates which apply to commercial premises.
However Ms Juctice Reynolds delivered a judgement in the High Court that found that the legislation underpinning the NPPR is designed to ensure that the Revenue allowed collected funds be paid in their entirity to the local authority. Collected funds “are steered in one direction only – locally and away from central government”. Central government is “deliberately bypasses to allow local authorities to be the collectors of the generated proceeds and are empowered to prosecute defaulters”.
Revenue have now appealed this decision to the Court of Appeal. It is not clear how long it will take the Court of Appeal to make a decision on this matter
The NPPR charge was €200 per relevant property per year for the years 2009 to 2013. If this appeal is overturned it could result in refunds due to thousands of landlords. After it was abolished in 2014 then Minister Phil Holgan stated that some 360,000 properties had been registered with more than €400,000,000 collected. Compliance with the charge had been positive.
A Non-Resident landlord with one property that paid the 2013 NPPR charge of €200 subject to the lower rate of Income Tax and below the threshold at which they would pay USC.
An Irish resident landlord with one property that paid the 2013 NPPR charge of €200 with PAYE Income of €28,000 subject to the lower rate of Income Tax and subject to the higher rate of USC.
An Irish resident landlord with one property that paid the 2013 NPPR charge of €200 with PAYE Income of €50,000 subject to the marginal rate of Income Tax and subject to the higher rate of USC.
The Interest and Penalties
The question on everyone’s mind, will the Interest and penalties applied for late payment be claimable also? As mentioned earlier often substantial interest and penalties were applied to outstanding payments.
Revenue are not answering this question yet but it is highly unlikely. For instance late registration fees paid to the PRTB are not allowable expenses against Rental Income.
The Four Year Catch
Many landlords are asking the question, why only claim for 2013 when the charge was paid in the years 2009 to 2012 also. Unfortunately it is a case of statute. Minister Noonan confirmed that there is a “statutory limit of four years from the end of the chargeable period to which the claim relates”
In a recent case the Tax Appeals Commission ruled that refunds due to two taxpayers dating back more than four years cannot be issued even though Revenue confirmed that tax was overpaid by the taxpayers. The commission found that it did not have the power to get Revenue to make the relevant repayments.
The appeals commission stated that the wording of the relevant 2007 tax legislation stated that a claim for repayment shall not be allowed unless it is made within 4 years. The use of the word “shall” does not allow discretion in the application of this directive.
If you are a landlord wishing to make Rental Income Returns, contact myself, Breda. You can find by email at firstname.lastname@example.org, or phone 05991 29812