Category Archives: Property tax valuation
Valuing your home for the Local Property Tax
Determine the market value of the property
Any house, apartment or lodge which is habitable and which could be sold separately will be subject to the tax.
The market value of the property must be determined as of 1st May 2013 and will form the basis of the annual charge for 2013, 2014, 2015 and 2016. Any home improvement changes or increases in property prices during this period will not affect the property tax liability.
Valuing urban homes in estates in cities should be relatively straightforward using online resources
Valuing farm houses, one off houses in rural areas and large country houses will present more of a challenge. If two individual units are tied by a planning consent which intrinsically links the two, then in this instance they would count as one dwelling. On the other hand, a main residence with separate ‘granny flat’ may require a return for two residential units. The same would apply to a period house with a staff lodge and gate lodge.
How to Value your Property
The valuation of residential properties is generally done through direct comparison, i.e. if an identical house on the same road recently sold for €300,000 then the value of the house being valued will most likely be €300,000.
All house price sales from 2010 are listed on www.propertypriceregister.ie Other resources included the property portals such as www.myhome.ie and www.daft.ie. These websites are useful because the information from the property price register is placed on maps, making it easy to identify where the most recent homes have sold relative to the home being valued.
Analysing Comparable Information
Unfortunately, it is very unlikely that an identical home will have been recently sold and some analysis with adjustments to reflect the differences in size, location, condition and date of sale will be required.
There is no strict rule on how to draw comparison from nearby sales but adjustments to the values achieved are generally required to reflect the following;
- Location
- Size
- Layout
- Condition
- Specification
- Decoration
- Parking
- Service charge
- Garden aspect
The above is not an exhaustive list and the individual points can have more or less impact depending on the type and location of the property being valued. More weighting should be applied to the most recent sales evidence of similar type properties with close proximity to the property being valued.
If it becomes apparent that professional advice is required, it is worth noting that the responsibility still rests with the owner to have a correct valuation. If the valuation advice provided is incorrect then it is the owner who is liable for fines / penalties.
Landlords should be aware that the Local Property Tax is not currently deductible for tax relief
Ensure your property value is in the correct band
There are 20 valuation bands starting from €0-€100,000 and ending up at values greater than €1m.
In determining the amount to pay, Revenue has a calculator available on its website www.revenue.ie
For valuations over €1m, a precise valuation is required by the Revenue Commissioners in order to accurately calculate the Local Property Tax due.
Filing Local Property Tax Returns
Payments can be made by bank transfer, or by monthly direct debit, or be made online for which there is an extended deadline of May 28th
Another option is to have the tax deducted as source by your employer.
Property price register
After years of calling for property price clarity and lagging our UK neighbours by some distance we overcame data protection sensitivities and began publishing residential property sale prices in September 2012. The register was poorly formatted, lacking in depth and detail and littered with mistakes. Nonetheless transactional information in a dysfunctional market was broadly welcomed.
The Residential Property Price Register is produced by the Property Services Regulatory Authority (PSRA) pursuant to section 86 of the Property Services (Regulation) Act 2011. It includes Date of Sale, Price and Address of all residential properties purchased in Ireland since the 1st January 2010, as declared to the Revenue Commissioners for stamp duty purposes
It is important to note that the Register is not intended as a “Property Price Index”.
In a small number of transactions included in the Register the price shown does not represent the full market price of the property concerned for a variety of reasons. All such properties are marked **.
If the property is a new property, the price shown is exclusive of VAT at 13.5%.
The PSRA disclaims the property price data by saying…
“The information in the Register is that which is filed for stamp duty purposes with the Revenue Commissioners by those doing the conveyancing of the property. At present nearly 100% of the data is filed on-line directly by the purchaser’s solicitor. Any errors in the data are errors made by those filing the data. The PSRA does not in any way edit the data. It simply publishes, in a fully transparent manner, that which is filed.”
The Authority acknowledges that there are errors in the data. Where errors are discovered or reported to the Authority they will be taken up with the Revenue Commissioners.
Why use a RICS registered valuer?
RICS Valuation – Professional Standards (the ‘Red Book’) contains mandatory rules, best practice guidance and related commentary for all members undertaking asset valuations. The Red Book publication details mandatory practices for RICS members undertaking valuation services. All those who occupy, own, develop or trade tangible and intangible assets in today’s global markets rely on competent and impartial valuers.
Valuation matters to us all. Valuations underpin nearly all financial decisions from home mortgages to major investment and corporate finance transactions or stock exchange listings. Valuers play an important role in the move to converge the world’s accounting standards under International Financial Reporting Standards (IFRS).
To what types of valuation do RICS Valuation Standards apply?
As a general guide, the following property types currently fall within the scope of the RICS Red Book:
o Land and buildings (commercial property, residential property, agricultural property)
o Businesses and intangible asset
o Plant and equipment
o Personal property
o Mineral assets
In broad terms the Red Book applies to the following valuation purposes:
o Loan security
o Financial reporting (including valuations for investment funds and
companies)
o Investment portfolio performance
o Takeovers and mergers
o Stock exchange (eg IPOs)
o Purchase reports (other than pricing advice provided in the course of
agency which is exempt under PS 1.2)
o Taxation (other than valuations which are subject to separate statutory
processes)
Unless produced for reliance by third parties, rent review/lease renewals are generally considered to be advice provided in the course of negotiations and are exempt under VS1.1
Household Charge & Non Principal Private Residence tax
Who is Liable?
Household Charge : Owner of the property or the tenant if it is a lease of more than 20 years.
NPPR: Owner of the property or the tenant if it is a lease of more than 20 years.
Property
Household Charge: Applies to principal private residence in addition to any rental properties. The amount applies to each residential unit if the property is subdivided.
NPPR: All residential property not used as owners main residence. The amount applies to each residential unit if the property is subdivided.
Amount
Household Charge: €100
NPPR: €200
Installment Options
Household Charge: €25 per quarter – apply by 1 March in the year of assessment
NPPR: Not available
Payment Date
Household Charge: 31 March each year
NPPR: 30 June each year
Penalty
Household Charge:
Late payment fee of:
– 10% up to 6 months late
– 20% between 6 – 12 months late
– 30% beyond 12 months late
– Additional interest charge of 1% per month (12% annual)
NPPR: €20 per month
Tax Deductible
Household Charge: Not deductible against rental income
NPPR: Not deductible against rental income
Notification
Household Charge: Notification via leaflet.
NPPR: No postal notification. Email notification only if previously paid online
We’re happy to be of assistance if you would like any further advice alternatively the NPPR website is here & Household Charge website here
Residential Property Tax
Residential property tax was abolished with effect for all valuation dates beginning on or after 5 April 1997.
Residential property tax was an annual tax chargeable on the market value of residential property owned and occupied on a valuation date which is 5 April each year.
A residential property is defined as a building, or part of a building, used or suitable for use as a dwelling, and the gardens attaching to the dwelling. Usually a residential property will consist of a house and garden. If a building is divided into apartments, each apartment will form a separate residential property if owned and occupied by different persons.
A residential farm building will include the dwellinghouse with any garden, but will not include out-houses, sheds or lands apart from the garden.
A house which is let by a person will not form part of that person’s residential property but may form part of the residential property of the lessee.
A person’s foreign property is chargeable to Residential Property Tax where that person is domiciled in this country. If, therefore, a person is domiciled in the State and owns an apartment in Spain which is available for his/her occupation, the apartment will form part of that person’s residential property.
Ownership
A person will be regarded as owner if that person, whether solely or jointly:
holds a freehold interest in the property
holds the property under a lease of more that 50 years
is the owner under a mortgage
rents the property where (i) the duration of the lease is 50 years or less and (ii) the rent payable is less than 80% of the open market rent (at the time when the rental agreement was made).
A person is not regarded as owner if he/she :
is chargeable to income tax (e.g. benefit-in-kind) in relation to the occupation of the property or
pays a full market rent, or
occupies the property under a caretaker’s agreement.
Occupied
“Occupied” is defined, in relation to a residential property, as having the use thereof, whether actually used or not. The words “whether actually used or not” cover the case of a holiday home which may be used as a residence during the year but may not actually be occupied by the owner on 5 April in a particular year.
A residential property will not, however, be taken to include a property which is normally let by a person but happens to be temporarily unlet on a valuation date (5 April) in any year.
Where a person is in the process of selling one property and has purchased another, only one property will be liable to Residential Property Tax (generally this will be the property in which the person is residing and where furniture is located on the relevant valuation date).
Valuation
For Residential Property Tax the value of a residential property on 5 April, 1996 is defined as the best price which the property would have been expected to obtain if sold on the open market on that date.
In valuing the property no deduction should be made for a mortgage or any other charge affecting the property.
Where a property has been altered or improved to cater for an incapacitated person normally residing therein, the market value of the property on 5 April, 1996 can be reduced by the value attributed to such alterations or improvements.
Any value submitted by a person in respect of his/her residential property will be subject to review by the Revenue Commissioners, and if the Commissioners consider that the value has been understated, they may re-value the property and assess the tax on the revised value. The taxpayer has the right to appeal against any value proposed by the Revenue Commissioners.
More about Residential Property Tax here
What is Griffith’s Valuation?
Griffith ’s Valuation is the name widely given to the Primary Valuation of Ireland, a property tax survey carried out in the mid-nineteenth century under the supervision of Sir Richard Griffith. The survey involved the detailed valuation of every taxable piece of agricultural or built property on the island of Ireland and was published county-by-county between the years 1847 and 1864.
The process of valuation was painstakingly thorough, involving multiple visits by valuation teams to analyse all of the factors influencing the economic status of the property: the chemical and geological properties of the land; average rents paid in the area; distance from the nearest market town. The aim was to get as accurate as possible an estimate of the annual income that each property should produce. This is the “Net Annual Value” figure (in £ s d, pounds sterling, shillings and pence) in the far right column of each valuation record. This was then used as the basis for local taxation, and continued up to the 1970s. The local authorities decided on a percentage of the Annual Value to be paid every year and usually expressed as “pennies to the pound”. For example a rate of 3 pennies to the pound meant that someone in possession of property valued as £10 would have to pay 30 pence, or 2/6.
The individual in economic occupation of the property was responsible for payment of the local taxation based on Griffith’s, with one exception: tenants with a holding valued at less than £5 annually were exempt, but their landlord was liable for the tax. This liability was a powerful incentive for landlords to get rid of smaller tenants in any way they could and certainly contributed to the wave of evictions that took place throughout the second half of the nineteenth century.
Much more about Sir Richard Griffith including maps here
Value is just Value, right?
Here we look at some key definitions and different types of value. This is by no means exhaustive but it can give you an idea of where value is more than a straight forward calculation or method.
Market Value
The estimated amount for which an asset or liability should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion.(IVS)
Market Rent
The estimated amount for which a property would be leased on the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.
Synergistic Value
An additional element of value created by the combination of two or more interests where the value of the combined interest is worth more than the sum of the original interests.
Special Value
An amount that reflects particular attributes of an asset that are only of value to a special purchaser.
Salvage Value
The value of an asset that has reached the end of its economic life for the purpose it was made. The asset may still have value for an alternative use or for recycling
Reversionary Value
The estimated value of an investment property at the end of a period during which the rental income is either above or below the market rent.
Residual Value
1. The anticipated value of an asset at the expiration of its useful life.
See also: Salvage Value
2. IFRS definition (IAS16): “The estimated amount that an entity would currently obtain from disposal of an asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life.”
The application of the IFRS definition is described in IVS 300 Valuations for Financial Reporting.
Present Value
The value, as of a specified date, of a future payment or series of future payments discounted to the specified date (or to time period zero) at an appropriate discount rate.
Net Present Value
The value, as of a specified date, of future cash inflows less all cash outflows (including the cost of investment) calculated using an appropriate discount rate.
Net Book Value
In relation to a business enterprise: The difference between total assets (net of accumulated depreciation, depletion, and amortization) and total liabilities as they appear on the balance sheet.
In relation to a specific asset: The capitalized cost less accumulated amortization or depreciation as it appears on the books of account of the business enterprise.
Liquidation Value
The net amount that would be realized if a business is discontinued and its assets are sold individually. The appropriate bases of value and any appropriate additional qualifying assumptions should also be stated.
Investment Value
The value of an asset to the owner or a prospective owner for individual investment or operational objectives.
Income Approach
A valuation approach that provides an indication of value by converting future cash flows to a single current capital value.
Initial Yield
The initial income from an investment divided by the price paid for the investment expressed as a percentage.
See also: All Risks Yield; Reversionary Yield; Yield; Yield to Maturity
Intangible Asset
A non-monetary asset that manifests itself by its economic properties. It does not have physical substance but grants rights and economic benefits to its owner.
Internal Rate of Return
The discount rate at which the present value of the future cash flows of the investment equals the acquisition cost of the investment.
External Valuer
A valuer who is not employed by the owner or manager of an asset.
Equity Value
The value of a business to all of its shareholders
Enterprise Value
The total value of the equity in a business plus the value of its debt or debt-related liabilities, minus any cash or cash equivalents available to meet those liabilities.
Discounted Cash Flow Method
A method within the income approach in which a discount rate is applied to future expected income streams to estimate the present value
Basis of Value
A statement of the fundamental measurement assumptions of a valuation.