An overview of the new Vacant Homes Tax (VHT)
On 15 December 2022, Finance Act 2022 (“the Act”) was signed into law. Section 96 of the Act provides for the introduction of a new Vacant Homes Tax (VHT) with effect from 1 November 2022.
The Government’s stated aim of the measure is the increase of the supply of residential properties for rent or purchase as another response to the housing crisis, rather than raise revenue.
The VHT applies in respect of residential properties (for the purposes of Local Property Tax (LPT)) that are occupied as a dwelling for less than 30 days in a chargeable period. This means it will not apply to derelict properties or properties unsuitable for use as a dwelling.
VHT is charged at a rate of 3 times the basic rate of LPT applying to the residential property for the year in which the chargeable period ends. The legislation provides that certain properties will not fall within the scope of the tax and also provides exemptions from the charge to VHT for properties that are vacant as a result of genuine and acceptable reasons.
The person who is obliged to file a VHT return and pay VHT for a chargeable period is the chargeable person, (i.e. the liable person for LPT purposes on 1 November). Generally, the chargeable person will be the owner of the property.
The due date for filing VHT returns is 7 November after the end of the chargeable period and the due date for paying VHT is the following 1 January.
The tax is operated on a self-assessed basis, which means that the chargeable person is required to determine whether or not they have a liability to VHT and satisfy their pay and file obligations, if any.
Revenue may require any chargeable person to file a VHT return for a chargeable period, notwithstanding that the person may not have a liability to VHT for that period.
Charge to vacant homes tax
The VHT will be charged, levied and paid in respect of a residential property for any chargeable period in which the property is in use as a dwelling for less than 30 days. It also provides that certain properties are outside the scope of the tax.
Obligations on chargeable persons
Chargeable persons are obliged to prepare and deliver a return in respect of VHT, retain relevant records and provide records on request to Revenue, demonstrating that a property was in use as a dwelling for 30 days or more in a chargeable period. Where such records are not provided, Revenue can deem the property to be vacant property for the purposes of VHT.
Interest on overdue tax, surcharge for late filing and penalties
Interest is payable on underpaid VHT, with a surcharge for the late filing of a VHT return and the application of penalties for failing to comply with VHT.
VHT is under the care and management of Revenue. A vacant homes register will be established and maintained by Revenue.
Revenue may make a request for information from a relevant person. Relevant persons are persons listed at Part 15 of the Finance (Local Property Tax) Act 2012. This list includes a number of statutory bodies and local authorities.
Revenue may provide anonymised information to the Department of Housing and the Department for Housing, Local Government and Heritage and can seek the assistance of a local authority and provide such information in relation to a property to them as they may reasonably require to provide the requested assistance.
Restriction of Deduction
VHT is not deductible for the purposes of calculating profits or gains to be charged to income tax, corporation tax or capital gains tax.
Liability on Sale
VHT is not a charge on property (unlike LPT) and evidence of compliance with the VHT provisions under the Act will not form part of the conveyancing process of a property.
Residential Property owners should be aware of their obligations as set out above and retain relevant records as required for the chargeable period. If they consider the property to be either not liable to or exempt from VHT, they will need to provide evidence to Revenue of the occupation of the residential property for the chargeable period, when filing a VHT return, if required. The first due date for filing a VHT return will be 7 November 2023, for the chargeable period from 1 November 2022 to 31 October 2023, with the first payment of the new VHT due on 1 January 2024.
Joan Byrne, Partner, Commercial Property Department
O’FLYNN EXHAMS LLP