In an effort to address housing shortages and encourage the utilisation of empty homes, Vacant Homes Tax (VHT) has been introduced. This innovative tax measure targets residential properties that are in use as a dwelling for less than 30 days, starting from January 2023.

In Overview of the Tax Environment in Relation to Property, Brendan Allen explains that the VHT is a significant step towards optimising the use of existing housing stock and penalising property owners who leave residential spaces vacant without just cause.

The Mechanics of VHT

The VHT applies to properties that are liable for Local Property Tax (LPT). It is determined based on the occupancy status of the property as of November 1 each year. To fall under the purview of this tax, a property must either be occupied as a dwelling, despite its condition, or be suitable for use as a dwelling but remain unoccupied. The term "in use as a dwelling" encompasses normal living activities such as eating, sleeping, and relaxing, indicating that the property serves as someone's home, even if for a brief period.

For the tax year 2023, the VHT is calculated at three times the LPT rate of the property. This rate is set to increase to five times the LPT from November 2023 through October 2024. Importantly, no deductions are allowable against the VHT, making it a straightforward calculation based on the LPT rate already established for each property.

Exemptions from VHT

Recognising that there are legitimate reasons for properties to be vacant, the government has outlined specific exemptions to the VHT. These exemptions aim to ensure fairness and consider circumstances beyond a property owner's control or situations where vacancy serves a temporary purpose. The key exemptions include:

• Properties Being Marketed for Sale or Rent: If a property is actively being marketed for sale or rent during the chargeable period, it will not be subject to the VHT. This exemption acknowledges the transition period needed to find buyers or tenants.
• Refurbishment or Structural Works: Properties undergoing significant refurbishment or structural works that render them unsuitable for occupation are exempt from the VHT. This exemption encourages property owners to improve and upgrade their properties without the penalty of additional taxation.
• Recently Deceased Person's Property: In the event of a property owner's death, the property linked to the recently deceased individual is exempt from the VHT. This provision allows families time to manage the estate without the immediate financial burden of additional taxes.
• Qualifying Tenancy or Sale: Properties sold or subject to a qualifying tenancy within the chargeable period are also exempt. This ensures that properties transitioning to new ownership or use are not unfairly taxed.

The Vacant Homes Tax represents a bold move to incentivise the efficient use of housing and alleviate the housing shortage crisis. By imposing a significant tax on properties left vacant for extended periods, the government aims to encourage property owners to bring these homes back into the housing market. However, with thoughtful exemptions in place, the VHT is designed to be fair, targeting only those vacancies that contribute to the housing shortage without justifiable reason. As we move forward, it will be interesting to observe the impact of the VHT on housing availability and whether it prompts a notable increase in the utilisation of vacant homes.

For the full session, please click here. In this course Brendan Allen covers the following topics:

• VAT on property, land and building key insights.
• Vacant Homes Tax (VHT) a new kind madness brought to us by the revenue.
• Capital Gains tax an unpleasant surprise when selling a site in your back garden.
• House Multiply Occupancy (HMO). There is an array of taxes that apply.
• Non Resident Landlord unlock the options that are available

The contents of this article are meant as a guide only and are not a substitute for professional advice. The author/s accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article.