How not filing your LPT return can lead to a 10% income tax surcharge on your income tax return
As the Pay & File Deadline approaches, self-employed individuals and company directors could encounter a 10% Surcharge on their income tax return if they have not yet complied with their Local Property Tax (LPT) obligations.
It is possible to avoid this LPT Surcharge by doing the following:
- File your LPT return, and
- Pay, or enter into an arrangement to pay, any outstanding LPT before your income tax return is filed.
If these actions are taken before the income tax return is filed, no LPT Surcharge will apply (provided the income tax return itself is filed on time).
In summary; you must ensure you are compliant with the Local Property Tax in order to avoid a LPT Surcharge.
If you have any queries, CAG Chartered Accountants would be happy to discuss this article relevant to your situation.
See below different scenarios and for more information read Revenue’s Guidelines
1. Client filing an income tax return but also has PAYE income
Take the situation where this taxpayer files his/her income tax return on time but has not filed his/her LPT return. Revenue advises us that this taxpayer will have had the LPT (based on the Revenue Estimate) compulsorily deducted from his/her wages. Notwithstanding this fact, an LPT Surcharge of 10% will also be applied to his/her income tax return, with:
- no credit for LPT paid through the compulsory deduction at source, and
- no capping of the LPT Surcharge until such time as he/she files their LPT Return.
2. Clients who have CGT as well as income tax liabilities in their returns
Where a client’s return has both an income tax liability and a CGT liability, Revenue has said that the 10% LPT Surcharge will be applied to both the income tax liability and the CGT liability.
The general rule is that where an LPT Surcharge arises on a return, that LPT Surcharge will be capped at the amount of the LPT liability once the taxpayer subsequently files their LPT return and pays their LPT liability.
However, where an LPT Surcharge arises on a return with both an income tax and a CGT liability, you need to look separately at the income tax element and the CGT element to determine what cap applies.
