Revenue win: second home charge is not allowable rental deduction

Oct 23, 2017

The Court of Appeal has reversed the High Court’s ruling and found in favour of Revenue’s position that the second home charge, known as the NPPR (non principal private residence) charge, is not an allowable deduction against rental income for income tax purposes. 

The judgement delivered by the Court of Appeal on 19 October in the case of Revenue Commissioners vs Thomas Collins (2016/581) found that the NPPR charge does not fall within the term “rate” or “levy” used in the Taxes Consolidation Act 1997 (section 97(2) of that Act).  According to the Court of Appeal judgement “the NPPR charge was not one which was “levied” by a local authority. Since this latter requirement is a pre-condition for satisfying the deductibility of s.97 (2) (b) of the 1997 Act, it is plain that the taxpayer’s claim for deduction on this ground much accordingly fail”.

The High Court (2016 IEHC 748) had determined, contrary to Revenue’s position that the NPPR charge could be taken as a deduction against rental income for income tax purposes. We reported the High Court’s ruling in Chartered Accountants Tax News

The NPPR charge was an annual charge of €200 collected by local authorities from owners of typically rental properties or holiday homes and applied for the years 2009 – 2013. 

Revenue have yet to issue any response to this Court of Appeal judgement and the treatment for landlords who claimed a deduction for the NPPR charge on the basis of the High Court judgement, is not clear.  The judgement also ignites the similar debate for Local Property Tax, which is currently not deemed an allowable deduction against rental income. 

We are grateful to Chartered Accountants Ireland member firm James Jennings & Co which took the case for alerting us to this outcome.