That, pursuant to Standing Order 200, Standing Order 154 is modified to provide that it be an instruction to the Select Committee on Finance, Public Expenditure and Reform, and Taoiseach that it has power to make provision in the Home Building Finance Ireland Bill 2018 in relation to the Finance (Local Property Tax) Act 2012 (as amended) to:
(a) extend the Mortgage Interest Deferral Relief for local property tax liabilities for one year in respect of 2019 liabilities; and
(b) continue to provide for the administration and collection of local property tax by employers in line with PAYE modernisation changes due to come into effect on 1st January, 2019;
and to make other consequential amendments required to take account of the changes above."
The purpose of the following remarks is to explain the background to and the need for amendments, tabled by the Minister for Finance, to the Home Building Finance Ireland Bill 2018 in relation to local property tax, or LPT. The changes encompassed by these amendments are required to provide for an extension of the mortgage interest deferral relief for local property tax liabilities for one year in respect of 2019 LPT liabilities. The proposals also involve continuing to provide for the administration and collection of LPT by employers in line with PAYE modernisation changes which are due to come into effect on 1 January 2019. The Ceann Comhairle has ruled that provisions concerning the LPT are not appropriate for inclusion in the Finance Bill. As the proposed provisions must have an operative date of 1 January 2019, they must be provided for in law before that date. Hence, we propose their inclusion in the Home Building Finance Ireland Bill 2018.
It is currently possible to defer, in certain circumstances, the payment of LPT liabilities. Deferral is most commonly availed of by property owners whose annual income is less than €15,000 for a single person and €25,000 for a couple, whether this is a married couple, civil partners or certain cohabitants. The income threshold can be increased in the case of property owners paying mortgage interest. In relation to such mortgage interest payees, the higher income threshold will cease to apply for tax years after 2018, unlike the standard income threshold which will continue for an additional year. The next valuation date for LPT is 1 November 2019, which will determine tax liabilities for the years 2020 to 2021. Arrangements in this regard are being considered as part of the review of LPT being carried out by an inter-departmental group. Consideration is also being give to how payment deferrals will operate in future. Pending the Minister's consideration of the report of the review group and any Government decisions that may arise therefrom, the higher income threshold applied by section 133 of the Finance (Local Property Tax) Act 2012 is being extended until 31 December 2019 in line with the standard income threshold. This proposed amendment is contained in section 36.
The bulk of the proposed amendments are necessary to allow for the continued collection of LPT when the PAYE system is modernised with effect from 1 January 2019. There are a range of methods for paying LPT and, as many people choose to have their LPT liability deducted from their wages under the PAYE system, this will be affected by the PAYE modernisation project. This project is the most significant reform of the PAYE system since its introduction in 1960 and is designed to deliver benefits for employees, employers, policy makers and the Revenue Commissioners. PAYE modernisation is designed to ensure that employers, employees and Revenue will have access to the most accurate and up-to-date information available relating to payment of wages, income tax, PRSI, USC and LPT deductions. This will ensure the right amounts are collected at the right time from employees and that employers pay their correct liabilities when required. It will further allow Revenue to manage taxpayers' records in an effective manner to ensure individuals pay only the correct amount of tax and receive the full benefit of their entitlements during the year.
The PAYE modernisation changes were introduced by the Finance Act 2017 and involve a move for employers to a real-time electronic system for engaging with Revenue from 1 January 2019. As will happen with income tax, PRSI and USC, employers who are directed to deduct local property tax from the salary of a liable person will be required to notify Revenue of the making of the relevant deduction on or before the making of salary payments to that liable person. Employers must also file a monthly return to report the local property tax deducted each month.
The changes to the collection of local property tax mirror income tax changes introduced in the Finance Act 2017. The changes do not make any changes to the local property tax system itself. Rather, they simply involve a change to the way in which the local property tax deducted by employers is reported to Revenue and the documentation to be used for this purpose. The tax itself will be deducted at the same time as heretofore and the amount will be exactly the same, with no change in rates, computation or reliefs.
The amendments related to local property tax are procedural and technical in nature and are necessary to facilitate the continued operation of the PAYE system, including the deduction of local property tax by employers and its remittance to Revenue. The legislative changes underpinning the continued administration and collection of income tax under PAYE modernisation were enacted in the Finance Act 2017. The changes proposed for the Home Building Finance Ireland Bill 2018 simply mirror for local property tax the changes already enacted for income tax in the Finance Act 2017 in this regard.
I hope my remarks have been of assistance to Members. We will have an opportunity on Committee Stage of the Home Building Finance Ireland Bill 2018 tomorrow to discuss further.