Vacant homes tax: A quick guide

Introduction

Vacant homes tax applies to owners, investors and developers of residential property and, significantly, may also apply to those persons even where the property is let. It may also apply to people entitled to occupy property including long term tenants.

What is vacant homes tax?

Vacant homes tax (“VHT”) is an annual self-assessed tax introduced by the Finance Act 2022. It has been effective since 1 November 2022.  VHT was charged at three times the rate of Local Property Tax (“LPT”) (excluding LPT local adjustment factors) for the period from 1 November 2022 to 31 October 2023. Pursuant to the provisions of Finance (No.2) Act 2023, however, with effect from 1 November 2023, the charge has been increased to five times the relevant LPT liability.

While certain exemptions may be claimed, VHT generally applies to residential properties which have been in use as a dwelling for less than 30 days of a chargeable period.

A chargeable period is a 12 month period beginning on 1 November and ending on 31 October of the following year. A VHT return must be electronically filed with the Revenue Commissioners for all in-scope properties on or before 7 November after the expiry of each chargeable period and any tax due paid on or before the following 1 January.

Who is a chargeable person?

The detail provided in the legislation itself is extremely important, but, essentially, the VHT regime piggy-backs on the LPT regime in terms of who is considered to be a chargeable person. This means that any person obliged to file a return and pay LPT will also be a chargeable person for VHT, with the associated VHT file and pay obligations. This includes owner-occupiers, investors and developers of residential property and others with rights to occupy property, including long term tenants. But it also means that a property owner may be liable for VHT even if the owner has entered into a lease. A property will not be in scope for VHT if it is the subject of an arms-length registered residential tenancy, but there is no exemption or change to the owner as chargeable person for other lease arrangements, including, significantly, leases granted to local authorities or approved housing bodies.

What types of properties are in scope?

A property must first be a residential property for VHT to be relevant at all. Again, the VHT regime effectively piggy-backs on the LPT regime with respect to what is considered residential property, so that if the property is a residential property for LPT, ie if it is in use or suitable for use as a dwelling on 1 November of the relevant chargeable period, then it will be a residential property for VHT.

The question of when a property, and a newly built property in particular, is suitable for use as dwelling has been the subject of Revenue guidance for the purposes of clarifying LPT liability, so that this guidance and the exact timing of the determination of suitability will now be relevant to developers not just with regard to LPT, but also for VHT.

In addition, and significantly, if either of the following occur during the chargeable period, VHT does not apply:

1. where the property is let to an unconnected tenant for at least 30 days at a market rent and the tenancy is registered with the Residential Tenancies Board (the “RTB”); or
2. where ownership of the property changes (by way of sale, gift, inheritance, or compulsory purchase).

If none of these factors apply to bring a property out of scope for VHT, the question of whether it has been a vacant home for the purposes of VHT during the chargeable period will need to be considered and, in that case, whether any exemptions apply.

What constitutes “vacant”?

A property will be vacant for the purposes of VHT if it has not been “in use as a dwelling” for 30 days or more during the chargeable period. What is considered to be “in use as a dwelling” is not defined in legislation but Revenue have published a Tax and Duty Manual to assist with clarifying these and other matters.

Exemptions

As already stated above, VHT will not apply if the ownership of the property changes during the chargeable period or if the property was let to an unconnected party at a market rent for 30 days or more and that tenancy was registered with the RTB. Properties are also automatically exempt from VHT if they are exempt from LPT. In addition, exemptions may be claimed where the property is vacant due to the death or illness of the owner, ongoing structural works, or if it is actively marketed for sale or rent, subject to certain court orders or owned by a North South Implementation Body.

Conclusion

More information on VHT can be found in the Revenue Commissioner’s Tax and Duty Manual or on their website here. The Revenue manual linked here includes a helpful decision tree and outlines in detail when VHT applies, when properties are outside the scope of the tax, the obligations on chargeable persons, Revenue powers and the exemptions that can be claimed.

Anyone who thinks they are or may be a chargeable person for VHT are encouraged to consider their obligations and options to comply with the legislation and to take advice.