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Friday 25 May 2018

Revenue win appeal over finding that second home charge is tax deductible against rental income

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Tim Healy

The Revenue Commissioners have won their appeal against a finding that an annual charge levied on second homes and holiday homes is tax deductible against rental income from the properties.

Several cases raising a similar point were awaiting the outcome of the appeal.

The Court of Appeal today overturned a High Court finding that the non-principal private residence charge (NPPR) -  introduced in 2009 to help local authorities fund services and replaced in 2013 by the property tax - was deductible against rental income.

The proceedings arose after Thomas Collins, owner of six rental properties, applied to deduct the NPPR charges from rental income.  In the tax year 2009, Mr Collins paid a total of €1,200 arising from a NPPR charge of €200 on each of the six properties.

When he sought to deduct the €1,200 against rental income received under the Taxes Consolidation Act, the Revenue said the charges were not deductible against income.

He appealed and an Appeals Commissioner held in his favour. The Appeals Commissioner asked the High Court to decide legal issues concerning whether the charge was deductible.

After Ms Justice Leonie Reynolds ruled last year the charge is deductible, the Revenue, represented by Jeananne McGovern BL, appealed to the Court of Appeal.

Giving the three judge court’s judgment  today, Mr Justice Gerard Hogan said the NPPR  was in some respects a forerunner to the more general form of property tax which has since replaced it.

However, the point raised in this case was of some general importance as several other cases awaited the outcome of the appeal, he said.

A pre-condition for deductibility of the charge required that it be “levied” by a local authority within the meaning of the relevant provision – Section 97.2.b - of the Taxes Consolidation Act 1997, he said.

The NPPR was not a charge levied by a local authority, he held. It was imposed by the Oireachtas and involved an autonomous decision by the Oireachtas  which had fixed the amount of the charge, albeit the proceeds were intended to benefit local authorities.

Local authorities were given no power to vary or review the charge and the 2009 Act does not fall into the category of local taxation raised by a local authority for tax purposes, he ruled.

He also rejected arguments on behalf of Mr Collins the charge amounted to “double taxation”. The issue of double taxation simply does not arise because the NPPR is a charge in relation to “property” while the 1997 Act provides for a tax on “income”, the judge said. 

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