Tuesday, March 05 14:35:34
The new Local Property Tax (LPT) laws could be a potential minefield for house buyers in the future, including forcing buyers to snitch on the sellers to the Revenue, tax experts warned today.
The "whistleblowing" clause means that, as part of the usual conveyancing process a solicitor will undertake on behalf of a client purchasing a house, they will now have to also "tick the boxes" on the LPT valuation that the seller gives.
This will involve additional costs and these may actually be passed on to the buyer, according to Dublin-based Taxback.com.
Recent amendments to the new LPT rules include a provision whereby home buyers must be provided with the initial Property Tax valuation by the seller.
There is a penalty of E500 for sellers who fail to comply.
Buyers will then have to satisfy themselves that the previous valuation of the LPT "could reasonably have been arrived at".
However experts at taxback.com say that - contrary to what the Government had previously planned - this could mean that the buyer will end up paying extra costs.
"When the Government first introduced the LPT initiative they said that it was not intended to result in any additional costs, other than the tax itself. However, the "whistleblowing" clause is hugely subjective - leaving it up to individuals who possess no property expertise whatsoever to decide on whether or not an initial LPT valuation, which may have been taken years previously, was correct. Naturally, people are going to want to comply with the Revenue so they may have to employ the expertise of solicitors, engineers and other property professionals to ensure they are providing accurate information," said Christine Keily.
She gives the example of a house bought for E400k in 2 years' time which was last valued at E200k in 2013.
When asked by the buyer as to why the LTP valuation was only based on E200k, the seller may respond that the property was only worth E200k at the time but that subsequently a lot of work and improvements were made to the property, resulting in a jump in value.
If the buyer isn't satisfied with the seller's answers, then they will have to inform Revenue that they are making an upward revision of the LPT due - effectively snitching on the seller.
Christine concluded, "It would be unreasonable to suggest that all individuals would be comfortable in assessing the work done to a property & estimating how much this would add to a valuation. So they may have to call on an expert to vouch for this. People should be under no illusion that Revenue won't check the accuracy of valuations made - one method of doing this will be to marry the Stamp Duty paid on a property with the LPT valuation".
Taxback.com say that if the house value has risen - information the Revenue can easily obtain via the property register - then the buyer may have to justify why they didn't reassess the initial value. Protecting themselves from probing by the Revenue may result in increased costs for compliance, further increasing the net cost of the LPT.