Q– I live in the UK but bought a house in Wexford in 2008. I have been using it occasionally as a holiday home and have never rented it out. I am now planning to sell it and someone mentioned to me that I might have a large bill to pay for Non Principal Private Residence charge. I never hear of that tax before and never received any bills. What do I do?
A –The Local Government (Charges) Act 2009 as amended by the Local Government (Household Charge) Act 2011 introduced a €200 annual charge on non principal private residences payable to the Local Authority in the area where the residence is located. It was payable in respect of each and every property a person owned that constituted a private residence where that residence was not the owner’s principal private residence. In your case, as you reside in the UK, I assume your principal private residence is there and even though your holiday home in Ireland may be your only residence in Ireland, it is regarded as a non principal private residence and liable to the NPPR charge. This annual charge applied for each of the years 2009-2013 inclusive but has now been abolished and will not apply in 2014.
The tax is owed by the person who owns the residence on a set day in any one year (31 July 2009 and 31 March in each of the years 2010, 2011, 2012 and 2013). It was payable within 3 months of each of those dates.
The penalties for late payment of the tax run at the rate of €20 per month. Whilst, on first glance, this may not seem huge it must be remembered that this will apply for each month of each year so in the case of the 2009 non payment, the penalty is €20 for every month from the 31 October 2009 until now. That equates to an annual penalty interest of 120% which must surely be the highest penalty rate on late payment of any tax in the developed world. If you have failed to pay the NPPR for all of the years since 2009 then you will be now liable to pay €4,220 to clear it- the tax due of approximately €1,000 and the balance in penalties.
If you fail to pay the tax and penalties outstanding by the 31st August this year, then the penalties become even more onerous. If the payment is not made, then as of September this year the tax and penalties for the years 2009-2013 rise to a very significant €7,230.
There are certain exemptions. The charge only applies to a residence so commercial properties are totally exempt from the charge. The charge does not apply where the residence is being occupied as the sole or main residence of the owner or where the owner is moving home and may own more than one home for a brief period of time-in these circumstances you will have to pay the NPPR charge and claim a refund at the end of the year. An exemption also applies where the residence is occupied rent free by a relative of the owner who also lives there or within 2 kilometres. Where the owner vacates the property permanently due to incapacity or ill health or where the property is held by a charity or discretionary trust then the tax does not apply.
In your case, it appears that you are liable to pay the NPPR charge and all of the late payment penalties for the 5 years 2009-2013 inclusive. As this is a self assessment tax, it is not a defence to claim that you never heard of the tax or that the no official ever wrote to you to demand the tax or advise you of its existence/your liability
If you wish to sell the house, any purchaser will require proof either that the NPPR did not apply to the property- in the form of a certificate of exemption- or that the NPPR was paid- in the form of a certificate of discharge. You simply cannot sell the house without paying the tax and penalties.
In circumstances where a person sells a house which has definitely been their sole or main residence since 2009 then they still must apply to the local authority for a certificate of Exemption from the charge. To secure this exemption they must produce documentary evidence of having lived in the house as their sole residence. The Local Authorities vary in the type of evidence they seek but generally require sight of paid utility bills for the relevant period in the owner’s name. The logic behind this type of evidence is presumably that the utility bills would usually be in the name of a tenant if the property has been rented out and the Local Authority may also look at the level of the bill to see if the level of consumption reflects the property being used as a principal private residence.
The Act provides that failure to deliver a return for the tax, failure to pay the tax and providing false information relating to the tax are all offences for which a person may be prosecuted. As the penalties are so onerous and as the deadline of the 31st August is approaching (after which date the tax and penalties increase by €3,010!) any person who is in any doubt as to whether or not the tax is due should consult a Solicitor immediately.
Val Stone is the Managing Partner in Stone Solicitors, a law firm that has been practicing from 14 North Main Street, Wexford, for the last 22 years. The firm recently relocated to the former National Irish Bank building on the corner of The Bull Ring and North Main Street, Wexford. Stone Solicitors can be contacted on 053 9146144 or by e-mail firstname.lastname@example.org.