Under-valued homes are targeted in property tax clampdown
HOMEOWNERS who under-valued their properties by as much as €300,000 will be among the first to be targeted in a clampdown on property tax evasion.
The Revenue Commissioners will begin writing to owners from early next month asking how they arrived at the valuation, and will also seek proof that the property is worth less than neighbouring houses.
A March 31 deadline is in place for people to provide a correct valuation for the property tax, which came into force last July.
Details of the enforcement campaign came as Revenue unveiled a new computer system which allows it to check if people have deliberately undervalued their properties.
A spokesman said that in established areas, where there would be a mix of house types, a difference between €250,000 and €300,000 could result in the homeowners being asked to prove their valuation was correct.
In newer estates, where prices would be expected to be closer, a variation between €100,000 and €150,000 could be enough to warrant further investigation.
Using a system based on Google Street View and Google Maps, the computer programme allows the taxman to highlight properties which are valued significantly lower than neighbouring buildings. The maps show the average value of homes sold on the street and the value of each home as submitted to Revenue by the owner.
In addition, it allows officials to access the identity of the homeowner, their PPS number and if they have paid the household charge and property tax.
Dr Keith Walsh, from the Statistics and Research Branch of Revenue, said it would begin examining data over the coming weeks, adding that the public would not have access to the database.
"After March 31, we will start to look at property valuations that don't seem right to us and begin to challenge them," he said.
"We're able to map all of our data from the property tax returns and drop them on to a map of Ireland. That allows us to break the valuations down by street or neighbourhoods.
"If most properties on a street are valued at €400,000, and one or two are at €100,000, we will look for those outliers. Our team will look at those valuations and see if they're reasonable.
"We're not so much interested in the valuation the owner returned to us, it's how it compares with their neighbours. If we find properties like this, we look to see if Revenue can challenge them."
Among the reasons for a lower valuation – apart from a deliberate attempt to pay less tax – are owning a smaller home; living in a property built on a smaller site, or one which has not been subject to renovations or upgrades, such as an extension.
Since November, some 1,700 homeowners have revised their property valuations upwards.
The property tax is based on a rate of 0.18pc for homes up to €1m, with a higher rate of 0.25pc applied for any value over €1m. There are 19 valuation bands, the first of which runs from €0 to €100,000 with the remaining grouped into €50,000 bands, and Dr Walsh said the enforcement campaign would be focused on homes "five or six bands" – or between €250,000 and €300,000 – "outside the norm".
"I think the outliers will vary from area to area," Dr Walsh said. "A newer housing estate would expect to have values close together, so one or two bands could be an outlier. In a more established area, it could be higher.
"All of our focus is on the biggest outliers – five or six bands outside the norm."
Revenue has published self-correction guidelines on its website which outline how homeowners can self-correct their LPT returns in respect of under-valuations or exemptions or deferrals incorrectly claimed.
Those who undervalued must make the changes by March 31 next.
Anyone who over-estimated the value of their homes can also seek a refund of the excess tax paid, but they will have to write to the Revenue Commissioners providing proof that they overvalued their homes.
Last month, Revenue announced a six-week deadline for people to regularise their affairs, and said since then some 20,000 returns have been made.
The compliance rate for 2013 is 93pc, and stands at 83pc for 2014.
Penalties for not paying include 8pc interest being added to the bill, penalties of the tax due being applied in addition to the original bill, and fines of up to €3,000.
An enforcement campaign will also be taken against up to 460,000 people who failed to pay the household charge.
A spokeswoman said it could begin mandatory deductions from salaries of PAYE workers who have refused to pay.
For self-correction guidelines: www.revenue.ie/en/tax/lpt/self-correction-lpt-return.html.
Applications for refunds must be made at Local Property Tax Branch, Revenue Commissioners, PO Box 1, Limerick, along with relevant documentation in support of the claim.