Property recovery hit by home tax blunder

21 November 2013 02:06

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Just as the housing market was getting back on its feet, a loophole that exempts most buyers this year from the property tax is causing mass confusion.

A massive mistake in the wording of the property tax legislation, as revealed by the Irish Independent, unintentionally gave a three-year exemption to most homeowners who bought during 2013.

But the latest property tax confusion centres around who actually owns the house when the tax liability arises.

Sellers currently finalising the sale are saying they shouldn't have to pay the tax due for 2014 as they won't own the house next year.

However, buyers are claiming that they are exempt from the property tax for the first three years and so argue that they won't pay either.

The sale can't actually go through until the property tax bill is sorted out.

The logjam will affect an estimated 4,500 house sales in the last two months of the year.

The latest property tax debacle comes as the Government performed a major U-turn on plans to force thousands of farmers and the self-employed to pay their tax months earlier than usual.

That was greeted with relief from the business and agricultural communities.

Now Finance Minister Michael Noonan is under pressure to step in and clear up the latest property tax chaos.

Reform Alliance senator Fidelma Healy-Eames said she had been contacted by solicitors handling house sales who said the situation was a mess.

She said there were 2,240 house sales in October and that up to 4,500 sales were likely to be completed in November and December.

"This is causing enormous stress. The minister and Revenue need to clear this up," she said.

Ms Healy-Eames wants the Oireachtas Finance Committee to call in Revenue officials again to clarify matters.

Meanwhile, the Finance Minister has revealed that he had known about the property tax loophole since the spring.

Mr Noonan said: "There was an error in the drafting of the bill, which was brought to my attention last spring. Rather than announce something that might adversely affect the property market, particularly in Dublin, which was just about to take off at the time, we said we would leave it go and correct it at the end of the year."

At the moment, solicitors trying to close house sales are inundating Revenue with queries. The Law Society also met with Revenue officials this week to try to clarify the matter.

Buyers only have until the end of the year to complete the sale to be exempt from property tax for the next three years.

But sellers are bizarrely being asked to tell Revenue now how they will pay the property tax for 2014 on a house they won't own.

The Law Society said it had received a "huge number of queries" from solicitors about different aspects of the local property tax (LPT).

"Practitioners have reported great difficulty getting answers to their queries on LPT from Revenue, particularly by telephone," said Law Society director general Ken Murphy.

"Vendors are upset at having to pay the property tax on a house they will no longer own. The purchasers are also saying they won't pay it.

Revenue said whoever officially owned the house on November 1 this year was liable to pay the property tax for 2014.

And in a note to solicitors across the country, the Law Society said Revenue had confirmed that if sales are not complete before the end of 2013, purchasers will not be able to claim the three-year exemption.

"Revenue has confirmed that they will go by the date of completion of the transaction, not the date of the contract, and that they will not entertain claims for an exemption where the closing takes place after December 31, 2013."


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