Window of opportunity to make most of tax initiatives
As trading up slips beyond reach once more, renovating the house is a good alternative and you can claim VAT back, says Sinead Ryan
With new figures showing house prices almost back at boom levels in some places, many homeowners despair of being able to trade up for growing family needs. There seems little prospect of levelling out in the short term and new home building is still woefully below demand.
So, the Home Renovation Initiative (HRI) is going to be even more popular and it was extended (no pun intended) in the last budget until December 31, 2018. This week, I'm looking at how it works and what you need to do before you start making like Dermot Bannon.
The HRI is a Revenue-based scheme, ie, it is a VAT refund based on certain conditions. Since it was launched in 2013, over €1.2bn has been returned to taxpayers availing of the initiative, with 77,000 home improvement works carried out. This is an average spend of €16,000 per project, and kitchen extensions, attic conversions and maintenance works are the most popular. Of course, it also helps the beleaguered construction sector too.
how it works l For works costing between €4,405 and €30,000 (before VAT), you get the added VAT refunded to you over two years. VAT is charged at 13.5pc for building works, so the return is €595-€4,050, depending on what you spend.
l The refund is not made in one go. If you pay the bill in 2017, the tax refund starts for PAYE workers in 2018, payable over 24 months. It is done via annual tax returns for the self-employed.
l It's important to note that you must be a taxpayer to get tax relief. This may exclude those outside the tax net, eg those living on the state pension alone, even if they pay USC.
l It is not possible for someone else (eg an adult child), to pay for the works and claim the relief. It must be the homeowner.
l For those already qualifying, if you lose your job, or suffer a loss of income, Revenue will still pay you the refund, but has the right to do so over a longer period.
The Rules - HomeOwners
l You must be up to date with your Property Tax.
l The spend must be exclusively on "Repair, Renovation or Improvement works", although the list of qualifying builds is quite extensive (see table), including landscaping and window replacement, for instance. You cannot get VAT back on soft furnishings, white goods etc, but painting and decorating is allowed.
l Your contractor(s) must be registered for HRI and you both apply online with Revenue (revenue.ie). The website also has a list of registered builders, so you can see immediately if they are on it.
l You must give the contractor your Property ID (from your LPT form). l Always get multiple quotes and references from contractors. Ask if all materials are included, and if not, what you need to supply yourself (if you buy paint or tiles for instance, you cannot claim VAT back. If they supply it, you can.) l From January 2016 landlords can also apply under the scheme. l If you are also applying for a SEAI grant (eg for insulation or a boiler), three times the grant amount is deducted from the HRI application before you claim. Most people will treat both separately and not claim the VAT on grant-aided works, but do the maths yourself.
The Rules - Contractors
l A HRI qualifying contractor must be registered with Revenue.
l Professionals such as architects, solicitors, surveyors etc, who charge VAT on services at 23pc do not qualify. l Multiple contractors can be used but the entire job must be within cost limits.