One of the key differences between the NPPR charge and the now LPT is that the NPPR charge was only in respect of residential property that was not the owner’s only or main residence in those years, for example it would have been imposed on holiday homes and properties that are rented out.
Although the NPPR charge was abolished from 2014 onwards, it has recently made the headlines again. One of the contentious issues when the charge was introduced was Revenue’s instruction that the payment of the charge is not an allowable expense in computing taxable rental income. However, the High Court has now ruled that the NPPR is deductible against rental profits. Landlords will note this decision with interest. It means that landlords can review their historic tax returns and, where appropriate, can amend to claim tax relief on the annual charge. The crux of Revenue’s argument is that the NPPR charge is not a rate levied by a local authority – if it was, then it would be tax deductible. However the Court held that the charge was not a central government charge, and that it is a local authority rate - and a rate levied by a local authority is deductible from rental profits for tax purposes.
This is an interesting judgement particularly in light of the fact that there is a time limit for claiming refunds of tax overpaid. Claims for tax refunds should be made within four years of the end of the year to which the claim relates. If that strict interpretation was to be applied, the 2013 tax year would be the only year that taxpayers can now amend to retrospectively claim the tax deduction for the NPPR charge if they have not already done so. The tax years from 2009 to 2012 would fall outside of the permitted time limits. It is hoped that Revenue will clarify their position on this, and that they will allow claims for the tax periods prior to 2013.
The NPPR charge no longer applied from 2014 onwards, but outstanding liabilities are still being collected by local authorities and are subject to substantial interest and penalties. The High Court judgement did not specify if the interest and penalties are deductible expenses. It will be interesting to see if Revenue issue guidance on this whole issue.