Vacant Homes Tax (VHT)

Employer Update

Background

The Finance Act 2022 introduced Part 22B of the Taxes Consolidation Act 1997 which provides for a charge to Vacant Homes Tax (VHT) to be applied in respect of residential properties that are occupied as a dwelling for less than 30 days in a chargeable period.

The key objective of the VHT is to increase the supply of homes available for rent or purchase, by encouraging the owners of vacant residential properties to bring those properties back into use.

Details

Who is liable to the VHT?

A chargeable person for VHT purposes is someone who owns a residential property which was not used as a dwelling for at least 30 days in the 12-month chargeable period and where the property does not fall into one of the specific VHT exemptions. The property must be subject to the Local Property Tax (LPT) in order to be subject to the VHT.

What are the key dates to consider?

The chargeable period runs from 1 November to 31 October of the following year.  Given the recent introduction of the VHT in Finance Act 2022, the first chargeable period ends on 31 October 2023.  A chargeable person must submit a VHT return online under self-assessment by the deadline of 7 November 2023. A return must be submitted where the VHT is due, where an exemption from the VHT is being claimed or where Revenue has notified an individual to file a VHT return.

The VHT liability must be paid on or before January 1 following the end of the chargeable period.

What is the rate of VHT?

For the chargeable period ending 31 October 2023 the rate of VHT is three times the base rate of Local Property Tax (LPT) which is the rate excluding any local adjustment factor. It was announced in Finance (No. 2) Bill 2023 that the rate of VHT will increase to five times the basic rate of Local Property Tax for chargeable periods commencing 1 November 2023. 

Non-compliance with VHT can result in the following:

• A surcharge for late filing of 5% of the VHT payable where the return is filed within two months of the due date or 10% of the VHT payable if the return is filed after this date;
• A penalty for failing to file a return or for filing an incorrect return;
• Interest on late payment.

What are the exemptions available against the VHT?

There are several exemptions for the VHT which are set out below:

• Properties where the owner has died;
• Properties where a Grant of Representation was issued;
• Properties actively marketed for sale;
• Properties actively marketed for rent;
• Properties subject to certain Court Orders;
• Properties that underwent structural works;
• Properties unoccupied due to illness of owner;
• Properties owned by a North-South implementation body.

If a residential property is occupied as a dwelling for at least 30 days in the chargeable period, the VHT is not due and an exemption does not have to be claimed.

Impact on employees

Employers may have employees on international assignments who are liable to the VHT.  This would particularly be the case where family members have accompanied the employee to the overseas location and as such the home in Ireland is vacant. We recommend that you forward this alert to any employees that you believe may be impacted by the VHT.

EY has made representations to Revenue requesting that the exemptions for the VHT be extended to include individuals posted overseas on temporary assignments by their employer. This would bring the legislation in line with the Principal Private Residence relief for capital gains tax purposes that allow for a relief for capital gains tax where a property is re-occupied at the end of an international posting. However, there is no indication that Revenue will extend a similar exemption to the VHT.

Employers should consider updating assignment policies and related communications to make it clear who will be responsible for payment of the VHT. Please note that payment of the VHT by an employer would be considered a taxable benefit in Ireland and should be grossed-up through payroll if the employee continues to be taxable in Ireland to ensure the employee does not bear the payroll tax cost.

How EY can help

EY can provide assistance to employers with assignees who may be impacted by the VHT in the following ways:

• Working with employers to review and update their assignment policies for the VHT;
• Working with employees to determine whether they are chargeable to the VHT;
• Assistance with the filing of VHT returns and the payment of the VHT.

For additional information with respect to this alert, please contact the following:

Michael Rooney
Partner
T: + 353 1 221 2857 | E: michael.rooney@ie.ey.com

Marie Caulfield
Partner
T: + 353 1 221 1416 | E: marie.caulfield@ie.ey.com

Rachel Dillon
Partner
T: + 353 1 221 2554 | E: rachel.dillon@ie.ey.com

Caoimhe Neary
Director
T: + 353 1 479 4007 | E: caoimhe.neary@ie.ey.com

Elaine O’Gara
Director
E: elaine.ogara@ie.ey.com

Colin Spence
Director
T: + 353 1 221 1240 | E: colin.spence@ie.ey.com

Jennifer Sweeney
Director
T: + 353 1 479 4007 | E: jennifer.sweeney1@ie.ey.com

Waterford

Gillian Moore
Director
T: + 353 1 479 2216 | E: gillian.m.moore@ie.ey.com