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Following several meetings with Revenue – during which representations about the practice implications for solicitors in the implementation of the Local Property Tax (LPT) were made on behalf of the profession by members of the Law Society’s Conveyancing Committee, Taxation Committee, eConveyancing Task Force, and the Probate, Administration and Trusts Committee – Guidelines for the Sale or Transfer of Ownership of a Relevant Residential Property have now been published by .

The guidelines are extensive and detailed and, because they deal with a tax that is new to practitioners, the committees recommend that solicitors read them in full and thoroughly familiarise themselves with them before advising either a vendor or a purchaser in a sale or purchase transaction.

The Society is pleased to say that most of its submissions and representations made throughout the course of its liaison with Revenue have been taken on board and are reflected in Revenue’s guidelines. The Society was successful in getting Revenue to accept that purchasers must be given some assurance that the property they purchase is not subject to a charge in respect of a vendor’s unpaid LPT where the value declared by the vendor on an LPT return is less than the subsequent sale price. This assurance is provided in one of two ways.

1. General clearance – subject to three conditions

This general clearance should cover the vast majority of sales. It is determined by a purchaser by reference to the online LPT status of a property. Revenue is not directly involved in this clearance process and will not issue written clearance if any one of the three conditions below applies. See section 4.2 for Revenue’s outline of what this general clearance entails and, in particular, the details of the three conditions, any one of which, if it is met, will assure a purchaser that Revenue will accept that there is no charge on a property following a sale where it establishes after the sale that a vendor had under-declared his/her LPT liability before a sale. The three conditions can be broadly described as:

• Allowable valuation margin. This relates to the allowable margin by which the sale price of a property exceeds the valuation band/chargeable value declared for the property at the valuation date. See section 4.2.1 for the three levels of allowable margins set respectively for (a) the first five valuation bands (that is, up to €300,000) – the sale price must fall into the valuation band immediately succeeding the band that was declared; (b) the remaining 14 valuation bands (the sale price must not be more than 15% higher than the upper limit of the band that was declared); and (c) properties whose declared chargeable value exceeded €1,000,000 (the sale price must not be more than 15% higher than the declared chargeable value).
• Expenditure on enhancements to a property. This relates to whether or not a vendor has enhanced the value of the property since the valuation date by carrying out construction or refurbishment work. See section 4.2.2 in relation to adjustments of the margins referred to in section 4.2.1 by the value of construction and/or refurbishment carried out. Take note, also, of the requirement that the vendor produce receipts/ verification of expenditure on construction and/or refurbishment.
• Sales of comparable properties. This relates to whether or not a vendor based the declared chargeable value on the valuation date on known and verifiable sales prices of comparable properties in the area. See section 4.2.3 for the rule and for the guidelines on deciding whether two properties are comparable and whether two properties are in a similar state of repair/condition.

This general clearance is for the protection of a purchaser. Revenue reserves the right to pursue the vendor for any LPT liability attributable to a pre-sale under-declaration. 

2. Specific Revenue clearance in certain circumstances

Revenue will provide specific written clearance on request from a vendor where the conditions specified in sections 4.2.1, 4.2.2, and 4.2.3 are not met, but the vendor nevertheless claims that the valuation made at the valuation date was made in good faith. See section 4.3 in the guidelines for all the conditions that apply and for a list of the supporting documentation that must accompany a request for clearance. It should be noted that:

• This request for clearance is conducted by secure email (pre-registration with Revenue is required) using Form LPT5 (which is confusingly titled ‘Application for General Clearance’).
• Application is made following agreement of the sale price but in advance of closing.
• Revenue will either issue a written clearance (where satisfied there was no under-declaration of the chargeable value), which the vendor must furnish to the purchaser on or before closing, or make an assessment on the vendor (where not satisfied that the valuation band/chargeable value that was declared was reasonable), which then becomes part of the standard online clearance process and which should be paid online by the vendor in advance of closing and the usual evidence of payment produced to the purchaser on or before closing.

It will be seen from section 1 of the guidelines that self-correction by a vendor (section 2.4) and the clearance procedures in section 4 of the guidelines relate to the first valuation date, 1 May 2013, and will operate on a trial basis up to the end of 2014, after which they will be reviewed. The Law Society committees continue to monitor this matter, and practitioners should continue to let them know of any difficulties being encountered in practice, or suggestions as to how the system could be improved, so they can continue to take these matters up with Revenue on their behalf.