Rental Income, NPPR & CGT
Prior to 2012 the Revenue Commissioners relied on voluntary disclosure in relation to taxation of rental income from investment properties, as there was no central database of second homes and investment property.
Since 2012 with the introduction of the 2012 Household Charge and 2013 Local Property Tax (LPT) each residential property in the state was allocated a unique property ID number, and individual PPS numbers have now been assigned to each residential property. Revenue now has a database of property ownership, which is constantly being refined.
Revenue is identifying owners of more than one residential property registered on the LPT database, and is also using the NPPR register. Owners are being asked to account for income tax due on the rental income. The targeting of this rental income is not a current project, but practitioners have noticed that on the sale of some houses, the Revenue have raised queries. We feel it is only a matter of time before more recourses are allocated towards investigating rental income, and we advise clients to ensure compliance to avoid the severe penalties, interest and publication.
The Non-Principal Private Residence (NPPR) charge introduced in 2009 and discontinued in 2013 relied on voluntary disclosure and payment. The NPPR charge is charged on the property and Local Authority clearance from the charge must be obtained on every sale.
LPT replaced the NPPR charge and while LPT is assessed by Revenue, the correct valuation of the property is the responsibility of the owner.
Capital Gains Tax
Sale of second homes and commercial property is subject to Capital Gains Tax at 33%. Clients are advised to retain receipts for any capital expenditure incurred on second homes. Capital expenditure includes structural improvements, insulation, central heating and windows. It does not include expenditure on cosmetic items such as painting and gardening. Costs of acquisition and disposal including stamp duty, auctioneer and legal costs are deductable.
The Revenue requires a CGT return for sales of property during the administration of the estate of a deceased homeowner and has sought payment of CGT on increases between the value of the property as submitted as at the death and the eventual sale price.
David Williams, Solicitor