The High Court has ruled that the non-principal private residence charge (NPPR) – the second homes tax – is deductible against rental profits.
This means landlords will be able to claim tax relief on the annual charge, which was applied from 2009 to 2013 at a rate of €200 per property that was not their only or main residence.
Revenue was appealing a 2013 judgment by a tax appeal commissioner which found that landlord Thomas Collins could claim tax relief on the NPPR in relation to his six rental properties where the charge applied. That meant Mr Collins could claim relief on the €1,200 annual NPPR charge he faced.
In its appeal, Revenue claimed that as the NPPR was fixed by national legislation, it was not a “rate levied by a local authority” and was therefore not deductible under the Taxes Consolidation Act 1997.
At the core of Revenue’s case was the contention that a national charge collected locally was distinct from a local authority rate. This would therefore mean that the NPPR was distinguishable from rates which apply to commercial premises.
Local authority
However, in a judgment delivered by Ms Justice Reynolds in late November, the High Court found that the legislation underpinning the NPPR is designed to ensure that the revenue achieved by it flows entirely to the local authority. Collected funds “are steered in one direction only – locally and away from central government” the court found. Central government is “deliberately bypassed to allow local authorities to be the collectors of the generated proceeds and are empowered to prosecute defaulters”.
The NPPR charge, which applied from 2009 to 2013, was replaced by the property tax regime. After it was abolished in 2014, then minister for the environment Phil Hogan said that compliance with the charge had been high with some 360,000 properties registered and more than €400 million collected. The €200 annual charge had fallen, in the main, on owners of rental, holiday and vacant properties including those properties where the owners lived abroad.
The NPPR no longer applied from 2014 onwards, but outstanding liabilities and payments are still being collected by local authorities and are subject to substantial interest and penalties.
If these are not paid, a charge is held against the relevant property for 12 years after the fees become due, and this will have to be discharged, in full, before a transfer or sale of the property can be completed.
