Vacant Homes Tax Explained

The new tax will be levied at a rate three times the basic rate for local property tax (LPT) (that is the rate of LPT before the local authority adjustment is applied) applicable to the relevant residential property. The tax will apply to residential properties that are occupied for less than 30 days in a 12-month period. The due date for filing the initial VHT return is 7 November 2023 with the first payment of the tax due on 1 January 2024. The first chargeable period will be from 1 November 2022 to 31 October 2023.

Procedure

The liable person for LPT for a particular property will be the person who will be chargeable for VHT for that property. A property will only be liable for VHT if it is liable for LPT, thus if the property qualifies for any of the exemptions from LPT, it will not be liable for VHT. Owners will have to determine if their residential property was vacant for any period during the chargeable period. There are several steps that owners can follow to determine whether their property is deemed “vacant” under the new legislation:

1. Was the property liable for LPT for the relevant period?

2. If so, was the property “in use as a dwelling” for less than 30 days in the relevant period?

3. If the property was liable for LPT and was not “in use as a dwelling” for more than 30 days, is the property eligible for an exemption from VHT?

4. If the property was liable for LPT and not “in use as a dwelling” for the relevant period, a VHT return must be submitted, and payment arrangements confirmed to Revenue.

If an owner determines that a property is subject to VHT, owners will be required to submit a VHT return on the VHT online service on a self-assessment basis. Further information in relation to the online service will be released by Revenue in the coming months. In addition to the above, owners may be asked by Revenue to confirm the status of their property. This will involve providing evidence that during the changeable period, a property has been:

• Occupied.

• Sold or advertised for sale.

• Subject to a qualifying tenancy or advertised for rent.

VHT Exemptions

There are a number of exemptions specific to VHT. Each exemption has its own qualifying conditions. VHT does not apply, even if a property was in use for less than 30 days in the chargeable period, in circumstances where the property was:

1. Sold in the chargeable period or actively marketed for sale on the open market at market value with no conditions attaching designed to delay or disrupt a sale.

2. Subject to a qualifying tenancy or the property was actively marketed for rent at market rent with no conditions attaching designed to delay or disrupt the negotiation of a tenancy.

3. The death occurred of the owner of the property in the chargeable period who occupied the property as their main residence prior to death and/or where a grant of representation issued in the estate of the former owner in the chargeable period.

4. The occupation or sale of the property was prohibited by a court order during the chargeable period.

5. The property was in use as a dwelling for less than 30 days during the chargeable period due to a physical or mental infirmity suffered by the owner and the infirmity in question has been certified by a medical practitioner.

6. The property underwent structural works for a period of over six months during the chargeable period without any undue delay and: a. a registered professional certifies that the occupation of the property during such works would have posed an actual threat to occupants and, where required, planning permission was obtained before the commencement of such works; b. the cost of the works exceeds an amount equal to one fifth of the property’s market value prior to the commencement of the works.

In order to prove that a dwelling was not liable for the VHT in any particular period, an owner may be required to produce evidence such as a utility bill, evidence of a short-term letting if the property was tenanted, or a statutory declaration confirming the property was “in use as a dwelling” for more than 30 days in the relevant period.

Penalties for Non-Compliance

Penalties for failure to comply with VHT obligations will include surcharges, penalties, and interest on late payments. Surcharges will apply in cases where an incorrect VHT return has been submitted. In the case of late submissions, interest will be applied for every day the VHT return is outstanding. The interest rate is 0.0219% per day, equalling 8% per annum. Owners may also be subject to a penalty for failing to submit a VHT return on time. It should be noted that, unlike LPT, there is no provision for making unpaid VHT a charge on a property.

Conclusion

The VHT is a new measure that will entail further obligations for owners of residential property. The list of exemptions included as part of the legislation is welcome and should hopefully ensure that owners are not unduly found liable in circumstances where a property is reasonably vacant.