If you have a vacant home, then you need to check whether you have a tax liability

18 September 2023

The Vacant Homes Tax (VHT) is an annual tax that applies to residential properties in use as a dwelling for less than 30 days in a 12-month chargeable period. VHT was introduced by Finance Act 2022. The explanatory memorandum of that Act as initiated explains that the “…key objective in introducing this tax is to increase the supply of homes for rent or purchase by encouraging the owners of vacant residential properties to bring those properties back into use. The tax will apply to properties which are residential properties for the purposes of local property tax (LPT). Therefore, as with Local Property Tax (LPT), VHT will apply only to habitable residential properties – it will not apply to derelict or uninhabitable properties”. Minister McGrath echoed this is in a response to a Dáil question in May of this year noting “This measure aims to increase the supply of homes for rent or purchase to meet demand, rather than raise revenue”.

The first chargeable period applies from 1 November 2022 until Halloween 2023 with a filing date shortly thereafter on 7 November with the related tax due in January 2024. VHT is charged annually at three times the base Local Property Tax (LPT) rate (the rate excluding any local adjustment factor) on the value of habitable residential properties, which have been used as a dwelling for less than 30 days in a chargeable period. VHT is charged in addition to LPT. Owners of vacant properties are required to self-assess their liability to VHT by looking back over the previous chargeable period to determine if their property was in use as a dwelling for less than 30 days in that chargeable period. Where a property has been in use for less than 30 days, a return must be filed electronically within 7 days of the end of the relevant chargeable period, i.e., by 7 November. Revenue recently issued a manual on their website regarding this new-fangled tax outlining when it applies, when properties are outside the scope of the tax, the obligations on chargeable persons, Revenue powers and certain exemptions that can be claimed.

For a property to be within the charge to VHT, and for VHT to apply it must be - (1) a residential property; and (2) in use as a dwelling for less than 30 days. The definition of residential property for VHT is the same as the definition for LPT but the term ‘dwelling’ is not defined in the legislation; Revenue’s manual explains it should therefore be given its ordinary meaning. The manual continues that “A dwelling is a place where a person lives either on a temporary or on a permanent basis… The term ‘in use as a dwelling’ is not defined in the VHT legislation and therefore should be given its ordinary and colloquial meaning. ‘In use as a dwelling’ means that a person lives in or occupies the property for normal living activities (e.g. eating, sleeping, relaxing, etc.)”.

Things get technical then for the purposes of meeting the 30-day test. According to the manual, “for a property to be considered to be in use as a dwelling for the purposes of constituting one day, it should be used for normal activities (eating, etc.) and be occupied overnight”.

The manual continues that “In exceptional circumstances, a property would still be used as a dwelling for a day even if no person has slept overnight in the property, for example where a person works at night-time but returns to the property after his or her shift ends and uses the property for sleeping, eating, relaxing, etc. There will be situations where a person may use two different properties as their dwelling on a particular day, e.g. someone who works in one location but spends weekends in another location. The property he or she occupies overnight is the property occupied as a dwelling on that day”. However, the manual also notes that the use of a property for storage of personal belongings and intermittent maintenance visits to a property would not qualify as ‘use as a dwelling’.

The above outlines what’s in, so what’s out. Certain residential property is outside of the scope of VHT such as property exempt from LPT; property subject to a bona fide tenancy for a period of at least 30 days in the chargeable period; and property which changed ownership during the chargeable period either by way of gift, sale, inheritance or a compulsory purchase. Coming back to the explanatory memorandum mentioned earlier, you can see how these exemptions fall in line with the tax’s objective i.e. increasing the supply of homes for rent or purchase by encouraging the owners of vacant residential properties to bring those properties back into use.

The example of the tenancy is important here in that a property will be outside the scope of VHT if it is subject to a ‘relevant tenancy’ for a minimum period of 30 days in the chargeable period. According to Revenue’s manual a ‘relevant tenancy’ is one that has been made between a landlord and tenant who are not connected with each other, and which has been registered with the Residential Tenancies Board (RTB).

Their manual outlines a number of categories of residential property that are currently exempt from LPT (if they meet the required Ts and Cs) are those that are:

• fully subject to commercial rates;
• vacated due to a long-term mental or physical infirmity of the liable person where that property was the sole or main residence of the liable person;
• a registered nursing home;
• used by a charity to provide special needs accommodation;
• used by a charity in connection with the provision of recreational activities;
• certified as affected by significant pyrite damage and accepted into the pyrite remediation scheme before 22 July 2023;
• purchased, built or adapted for occupation by a permanently and totally incapacitated person;
• owned by a North-South Implementation Body under the British-Irish Agreement Act 1999; or
• constructed with Defective Concrete Blocks where a certificate of eligibility under the Defective Concrete Blocks scheme has issued.

So, while there are some “outs” from the application of the tax, when you’re in then you’re in, and the tax liability follows. If you think you may be in, then you should check whether you’re out by virtue of any exclusion.

Please note this article first featured in the Business Post on Sunday, 17 September 2023 and was re-published kindly with their permission on our website.