The central question of this appeal before the Tax Appeal Commission (TAC) is the “meaning of entitled to immediate possession” used in the definition of liable person for the purpose of determining liability to Local Property Tax (“LPT”).

Background

The taxpayer sold property by contract dated 30 October 2013. The contract of sale was subject to a closing date of 4 November 2013 and a condition of the contract was that the taxpayer was under no obligation to complete the sale until funds from the purchaser were cleared. The date of stamping of the Deed of Transfer was 7 November 2013.

Revenue determined that the taxpayer held an interest in the property on the liability date of 1 November 2013. Accordingly Revenue held that the taxpayer was accountable for LPT for the 2014 year. The taxpayer paid the LPT without admitting liability. Following a formal determination by Revenue, the taxpayer appealed the Revenue’s position under section 34 Finance (Local Property Tax) Act 2012.

The taxpayer claimed that they were not the liable person for the purpose of LPT as on the liability date of 1 November they did not hold an interest in the property. This is on the basis that:

• The date of execution of the contract for sale is the appropriate date for the purposes of determining the “liable person”. There is ample precedent in respect of all other taxes that this is the relevant date for the passing of an interest in property. In this case the date of contract for sale was 30 October 2013
• The date of stamping of the Deed of Transfer, in this case 7 November 2013, is not the date of passing of an interest in property
• The taxpayer, nor his family, didn’t occupy, or have the right to occupy the property after 30 October 2013.

Revenue’s position is that:

• The taxpayer is the liable person as the entitlement to immediate possession ceased on the 7 November 2013, the date of execution of the instrument, and therefore the taxpayer is the liable person for LPT purposes as he had immediate possession of the property on the liability date of 1 November 2013.

Both Revenue and the taxpayer agreed that the taxpayer disposed of his beneficial interest in the property on the date of signing the contract per section 52 Land and Conveyancing Law Reform Act 2009. However, the transaction was not completed until 4 November 2013 when the taxpayer received the remaining consideration.

Relevant legislation

The main piece of legislation relevant in this case is section 11(1) Finance (Local Property Tax) Act 2012. This section provides that:

 liability for LPT is calculated with reference to the “liability date”, on the person who: “holds any estate, interest or right in a relevant residential property entitling the person to—

1. the immediate possession of such property for a period that may equal or exceed 20 years, or
2. the receipt of rents or profits of such property for a period that may equal or exceed 20 years”

In this case, the main question is whether the taxpayer at 1 November 2013, held an entitlement to the immediate possession of the property and whether that entitlement was for “a period that may equal or exceed 20 years”.

Determination

The Commissioner considered if the taxpayer was the person entitled to the immediate possession of the property on 1 November 2013 as required by legislation. The taxpayer was not the beneficial owner of the property on this date as the contract of sale was earlier on 30 October 2013 and consequently beneficial ownership passed to the purchase.

The tax is not imposed on a person holding the beneficial interest in the property for a period of least 20 years but on the person entitled to immediate possession for period that may equal or exceed 20 years. The purchaser was not entitled to immediate possession of the property until the transaction was completed, which was 4 November 2013. The taxpayer was the only person on the liability date of 1 November 2013 entitled to immediate possession of the property.

Recognising that the taxpayer was “contractually obliged to divest himself of the entire interest in the property”, the Commissioner determined that “this obligation did not extend to a situation where the purchaser, however unlikely, was unable to pay the outstanding monies”. The Commissioner noted that the taxpayer “could rescind the contract and retain the beneficial interest in the property”. And although it was unlikely that the taxpayer would be entitled to immediate possession of the property for a period that would equal or exceed 20 years on the liability date of 1 November, it was the possibility of such entitlement that gave rise to the LPT charge.

The taxpayer’s appeal was dismissed.

You can read the full determination on www.taxappeals.ie