Tuesday 28 February 2017

How to get your foot in the door with Help-to-Buy incentive

Paul Melia

Paul Melia

Housing Minister Simon Coveney has strongly defended Help-to-Buy scheme. Photo: Tom Burke
Housing Minister Simon Coveney has strongly defended Help-to-Buy scheme. Photo: Tom Burke

The Help-to-Buy (HTB) incentive, which was announced in October's Budget, is designed to help first-time buyers (FTBs) obtain the deposit needed to purchase or self-build a house or apartment. It must be the family home, and the rebate does not apply to investment properties.

It allows for a refund of income tax and DIRT paid over the previous four years, but not USC or PRSI. A maximum of 5pc of the purchase price of a home can be claimed, up to a maximum of €20,000.

The rebate applies to homes costing up to €600,000 if purchased or built between July 19 and December 31 last year. From January 1, 2017, a €500,000 price ceiling applies. Those buying homes costing more than this amount do not qualify.

A mortgage of at least 70pc of the price must be drawn down, meaning cash buyers cannot benefit.

Who can claim?

FTBs who purchase or self-build a home between July 19 last and December 31, 2019.

The FTB may not have previously purchased a property.

The scheme is open to multiple FTBs buying one property, but none may have previously owned a house or apartment. The maximum relief per property is capped at €20,000.

The FTB must have signed a contract to buy a home on or after July 19, 2016, or drawn down the first tranche of the mortgage on or after the same date.

What to do before you claim

All FTBs must be registered with the Revenue Commissioners for myAccount (for PAYE workers) or ROS for the self-employed. The tax refund claim is made through these portals.

PAYE workers must complete a tax return (Form 12) for the tax years selected for refund, if not previously done. Self-assessed workers must complete a Form 11. Any outstanding taxes must be paid.

How to apply

Applications are made online and certain information must be submitted. Details include confirmation that a contract has been signed, and a copy of same; details of the total deposit required and deposit paid; property details and purchase price; date of purchase; details of the mortgage provider;details of the FTBs claiming the relief and details of the developer in the case of new homes; and the solicitor if a self-build home.

Once the claim is submitted, the details will need to be verified by the developer/contractor in the case of a new build, or a solicitor, acting on your behalf, in the case of a self-build.

Can a claim be made if the property was bought before July 19 last?

No. The contract must have been signed, or the first tranche of the mortgage drawn down, on or after this date. The date was chosen because it was the date the Government's Rebuilding Ireland plan was launched. It was decided that July 19 would apply for the HTB initiative to avoid any slowdown in house sales by buyers who might decide to defer purchasing pending the announcement of full details.

Can workers who have been abroad, or retired people, apply?

Yes. But the relief is based on income tax and DIRT paid over the previous four years. In the case of workers returning home, or retired people, the applicant must have worked and paid tax in Ireland in some of the last four years to claim the relief. If no income tax has been paid, no relief can be sought. However, there may be cases where a refund of DIRT can be made.

Does an extension to an existing property qualify?

No. A new build is defined as a property never previously occupied.

How is the purchase price for self-builds calculated?

This is based on the valuation approved by the mortgage provider.

Can I rent out my home after I claim the rebate?

No. The rebate includes a number of 'clawback' measures, including one which requires the property to be used as a principal private residence for five years.

The incentive can be withdrawn if this condition is not adhered to.

When and how are refunds made?

Revenue says claims will be subject to "normal refund checks and criteria". For homes purchased in 2016, the refund is made directly to the FTB.

For new homes purchased from January 1 this year, it is made directly to the contractor, subject to the taxpayer's consent.

How will this work?

The builder or developer must be approved as a 'qualifying contractor' by Revenue. They must provide information including evidence of tax compliance, VAT registration details and details of the planning permission granted for the units. They must also provide particulars of the properties being offered for sale.

Details of qualifying contractors will be published by Revenue so buyers can check to see if a developer is approved.

Are there other 'clawback' provisions?

Yes. Where a contractor has received the rebate, but the purchase has not been completed within two years, a charge on lands owned by the developer will apply.

In cases where Revenue has "reasonable grounds" to believe the purchase will not be completed within two years of the payment being made, such as failure to build a house, the relief can also be taken back.

Further information is available at revenue.ie/en/online/help-to-buy.html.

Irish Independent

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