RP 2 - Residential Property Tax
RPT was abolished with effect from the 5th April 1997. The information in this leaflet was accurate at the time of issue.
Introduction
Residential property Tax is:
- an annual tax
- chargeable on the market value of residential property
- owned and occupied on a valuation date, which is the 5th of April each year.
The tax is charged at 1.5% on the excess of the market value of all residential properties of a person over an exemption limit and is payable provided the income of the household exceeds an income exemption limit.
The exemption limits for valuation date 5 April, 1996 are:
| Market Value | £101,000 |
|---|---|
| Income | £30,100 |
Example of Gross Tax Payable
Value of property £125,000 Less: Market Value exemption limit £101,000 Net Market Value £24,000 Tax @ 1.5% £360
Margina Relief
Marginal relief applies where the gross household income for the tax year 1995/96 exceeded £30,100 and did not exceed £40,100 (£45,100 for owner(s) aged 65 or over on 5 April, 1996)
How to calculate Marginal Relief
(a) Aged Under 65
Marginal relief is granted by applying the formula:
T x (A - E) / 10,000
where
- T: is the gross tax payable (before marginal Relief and Child Relief)
- A: is the amount of the gross household income (which is rounded down to the nearest £1,000)
- E: is the income exemption limit (£30,100 in 1996)
Example
Tax payable before Marginal Relief is, say, £1,500. Household income amounts to £36,600 which is £36,000 when rounded down to the nearest £1,000. The tax payable is reduce to the amount calculated by the above formula as follows:
1,500 x (36,000 - 30,100) / 10,000 = £885 tax payable
(b) Aged 65 or over
Marginal relief is granted by applying the formula
T x (A - E) / 15,000
Example
Tax payable before Marginal Relief is say £750. Household income is £34,450 which is £34,000 when rounded down to the nearest £1,000. The tax payable is reduced to the amount calculated by the above formula as follows:
750 x (34,000 - 30,100) / 15,000 = £195 tax payable
Child Relief
The tax payable is reduced by 10% in respect of each dependent child.
A dependent child must:
- be under the age of 16, or if over 16, be in full-time education, and
- have an income of less than £720 (£1,320 in the case of an incapacitated child) in the tax year 1995/96.
How to calculate Child Relief
You reduce the tax due by 10% for each dependent child.
Example
House value is, say, £150,000 on 5 April, 1996. The household income is £50,000 and Marginal Relief does not, therefore apply. There are two dependent children.
House Value £150,000 Less: Market Value exemption limit £101,000 Net Market Value £49,000 Tax @ 1.5% £735 Less Child Relief (20%) £147 Tax Payable £588
Where both Marginal Relief and Child Relief apply
Example
An example of the application of both relief's, assuming that in the preceding example the household income is £35,000 (not £50,000) and the houseowner is under 65 years of age is -
House Value £150,000.00
Less: Market Value exemption limit £101,000.00
Net Market Value £49,000.00
Tax @ 1.5% £735.00
Tax after Marginal Relief
735 x 35,000 - 30,100 /10,000 £360.15
Less Child Relief (20%) £72.03
Tax Payable £288.12
Residential Property
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 from 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.
Household Income
In general, household income means the aggregate gross income, from all sources, of the owner(s) and all other persons who normally reside in the residential property. However, the income of any resident in the property who is not an owner and who is aged 5 or over, or is permanently incapacitated is excluded.
- Where any of the owners is aged 5 years or over on 5 April, 1996, house-hold income is confined to that of the owner(s) only - the income of other persons living in the property is excluded.
- Where any of the owners is permanently incapacitated, the income of any person (who is not an owner) living in the property as a result of the medical condition of the owner is excluded.
- Where the owner is a widowed person, the income of any person (who is not an owner) living in the property as a result of the owner having dependent children is excluded.
One property with more than one owner
Where on property is owned by two or more persons, whether as joint tenants or as tenants in common, (whether in equal are in unequal shares) each is treated for tax purposes as the owner of the same property and the market value of the property and the market value exemption limit will be apportioned between them. In such cases, a single return and payment can be made, if preferred.
More complex ownership situations
Examples showing how to calculate the tax payable in more complex ownership situations (for example, family home in joint ownership of both spouses and, in addition, holiday home in sole ownership of one spouse) are available from the Residential Property Tax Section, Capital Taxes Division, Dublin Castle, Dublin 2.
Delivery of return
Every person whose house property was worth more than £101,000 on 5 April, 1996 should complete and deliver Residential Property Tax Return (Form RP1 to the Revenue Commissioners on or before 1 October, 1996. This obligation exists even if the household income was below the income exemption limit of £30,100 for the year 1995/96.
A person who receives a form in the post from the Revenue commissioners must complete and return it - even if exemption form paying tax on either value or income grounds applies.
Payment Options
Payment of Residential Property Tax for valuation date 5 April, 1996 is die on 1 October, 1996 and may be made in one lump sum on that date.
However, an option of payment by instalments is available. Under the instalment option:
- 25% of the tax due must be paid on or before 1 October, 1996 with
- the balance, together with 5% of that balance, to be paid in 10 equal instalments commencing on 15 November, 1996 and ending on 15 August, 1997.
Example
Tax due £400.00 Initial payment (25% - payment on or before 1 October, 1996 £100.00 Balance £300.00 Add 5% share to the balance £15.00 Total payable over 10 instalments Monthly instalments (one-tenth) £31.50
Clearance Certificate
Since 1 August, 1993 any person selling residential property valued in excess of the market value threshold (£101,000 in 1996), must provide the purchaser with a certificate from the Revenue Commissioners indicating that all Residential property Tax has been paid. Otherwise, the purchaser is obliged to deduct an amount from the purchase price and remit it to the Revenue Commissioners.
The amount to be deducted is 1.5% of the difference between the sale price and the market value exemption limit multiplied by the number of years that the vendor has owned the property, up to a maximum of 5 years.
Example
Date of Contract for Sale - 30 June, 1996. Sale Consideration - £200,000. In the absence of a certificate of clearance from the vendor (who has owned the property for 7 years), the purchaser must make the following deductions
1.5% x (£200,00 - £101,000) x 5 = £7,425
Payment of Tax
Residential Property Tax is due by 1 October each year, following the valuation date.
A self-assessed return (Form RP1) for 5 April, 1996 should, therefore, be completed and delivered, together with any tax due, by 1 October, 1996 to:
Capital Audit and Accounts District,
85/93 Lower Mount Street,
Dublin 2,
Ireland.
Cheques should be made payable to the Revenue Commissioners and crossed "not negotiable".
Interest at 1.25% per month or part of a month is payable in respect of late payments.
These notes provide a broad outline of the features of Residential Property Tax. They are not exhaustive and they are not a legal interpretation of the legislation.
August 2007