Rates and Finance

Local Authority Funding

Local authorities funding comes from rates, government grants and services.  The annual rate is based on the residual sum, being the deficiency in funds in the authority’s budget, which is not met from expenditure, state grants, local authorities, own resources.

City and county councils are empowered to make rates.  Town councils which were former Urban District Councils and Borough Councils had the power to levy rates. They were abolished in 2015.

A ratepayer may appeal against the rate on the grounds that the rate is illegal. The rating authority is entitled to recover rate even if an appeal is pending.  If an overcharge is made, it must be refunded.

Rates System

The modern rates system is still based on the system of rates applicable under the  Poor Law (Ireland) Act 1838.

Rates are a tax levied on the occupiers of certain properties.  All lands and buildings are in principle, subject to rates. Certain infrastructure is liable to rates.

The primary liability for the rates rests with the occupier. Prior to July 2014, any person in occupation could be made liable in respect of rates made within the previous two years.  2014 legislation puts the onus of discharging rates on the owner, where there is a change in occupier.

Rateable Property

Rateable property includes any land and buildings but does not include land used for no purpose whatsoever.  Mines, quarries, easements and similar rights are liable for rates. Rates apply to infrastructure such as water, gas, electricity mains.  This includes transmission systems and associated physical infrastructure.  They were rated as easements, although they are now rated on a single block basis.

Strictly, a property must be occupied, in order to be rateable.  However, an unoccupied property may be deemed to be in rateable occupation.  Liability for rates falls on every occupier of the rateable property.  The rate is payable by the person in occupation, although other parties can be deemed liable if there is no such person.  The occupier is the person who has the immediate use and enjoyment of the property.

Exemptions

There are  a range of significant exemptions,

• domestic property;
• agricultural land used for tillage, meadow, pasture, horticulture,  forestry, outdoor surfaces, farm buildings, buildings used for fur farming and training of bloodstock;
• State property is exempted. This covers lands occupied by a Minister for State, Defence Forces Garda Siochana;
• mines until seven years after opening;
• oil wells until twenty years after opening;
• buoys, beacons, lighthouses,

Land used for “charitable” purposes are exempt. See the section on the legal definition of a charity. Charitable purposes include use for not for profit educational, healthcare, religious purposes and similar public benefit purposes generally. There are statutory exemptions for a range of land used for similar purposes. The exemption covers most of the following categories of buildings when used on a not for profit basis

• burial grounds and crematoriums;
• schools and buildings used for educational purposes (on a not for profit basis with expenses defrayed by the Exchequer).
• places of worship;
• hospitals and infirmaries; (on a not for profit basis with  expenses  defrayed by the Exchequer);
• premises used for the care of sick, elderly,  handicapped or disabled persons on a not for profit basis (with expenses defrayed from Exchequer (but not otherwise);
• art galleries, museums, national monuments open for the public not established for the purpose of making a profit;
• community halls;
• buildings used by a society for the advancement of science or the arts;
• an exemption under various urban renewal incentive schemes in designated areas; the exemption from rates is for a number of years, typically up to 10 years.

Vacancy and Occupation

If a property is vacant, the rate is levied on the owner.  A refund may be available if it is unoccupied for the purpose of additions, alterations and repair or because its owner is bona fide, unable to obtain a tenant at a reasonable rent.  The refund is 1/12 per month during occupation.  The 2014 Act reduces vacancy relief to 50% of the liability..

In order to be a rateable occupier, the occupation must generally be exclusive and be of value to the occupier.  Transient occupation would not be enough to make a property “occupied” for rating purposes. A licensee may be liable to rates if he is in exclusive possession.

Domestic and Agricultural Exemptions

Historically, all domestic and agricultural property were subject to rates.  Domestic properties were exempted in 1978 and a grant was made to compensate for the loss of revenue. Over time, the grant did not maintain its value and the amounts concerned were reduced, causing funding issues. There have been a number of working groups and reports which have considered the modernisation of local authority funding and rates loss.

Extensive exemptions from rates were granted by statute for agricultural land  Rates ceased to be chargeable on agricultural land after a Supreme Court ruling that the method of assessment was arbitrary and unconstitutional, being largely based on the nineteenth century  Griffith’s Valuation. The charge to rates on agricultural land was not replaced. This further narrowed the rates tax base, and by default, rates remained as a charge, on “commercial” property only.

Valuation I

The Valuation Office is obliged to value all relevant property under the legislation. The rate book is prepared on the basis of the latest valuation list.  The first valuation (Griffith’s valuation) took place in 1838, on commencement of the poor law legislation.  Valuations were not updated for many years, and new valuations were undertaken on an artificial and comparative basis, relative to existing older valuations.

The Valuation Act 2001 went some distance towards modernising and making the law on rates valuation more coherent law. Under this legislation, the property is to be valued by reference to the net annual value of the property.  This is the rent which might reasonably be expected year on year.  The cost of repairs, insurance and maintenance are assumed to be borne by the occupier. An alternative method is based on the notional costs of construction. The value is fixed at a percentage (5%) of the depreciated replacement cost plus the site value.

Valuation II

All plant and equipment may be added to the value of the property and become rateable.  Plant, in this context, includes any fixture or structure attached to the property.  Certain machinery may come within the definition of plant. It may be a fixture or structure associated with a premises which although free-standing, is of a size, weight and construction such as to be permanent or semi-permanent.

There is an appeal against valuations for rating purpose.  The owner/occupier or the authority itself or any person who has an interest may appeal.  The first appeal is to the Valuation Commission.  The second appeal is to the Valuation Tribunal. There is a  further appeal to the High Court on a point of law only, with the possibility of a further appeal on point of law to the Court of Appeal /Supreme Court.

The local authority makes the rate based at the valuations at the date of the adoption of its annual budget estimates.  Once the rate has been determined based on the valuations and the poundage (the multiplier of the total valuation of premises), demand notes are issued by the rate collector.

Enforcement

The rate is collectable in equal half instalments.  The first is due in the early part of the year and the second on the first day of July.   At the end of the year, the rate collectors prepare a schedule of uncollected rates and a decision is made regarding recovery or write off.

Rates can be recovered by a number of means.  There are extensive powers to collect rates.  Rates can be recovered by distress which involves the non-judicial seizure of goods.  This is not used in practice, given constitutional questions.

There is a short form application to the District Court, whereby the rates collector makes a complaint, which is a statement to the effect that the rate is unpaid. The District Court may issue a warrant authorising distress and sale of goods. This Order is not a decree capable of being registered as a judgment mortgage.

The local authority may obtain a decree/order for the money due.  The Council itself  (and not the rate collector) may use this procedure.  Proceedings can be bought in the District Court / Circuit Court in accordance with their limits of jurisdiction.