Thursday 14 December 2017

Seven things you need to know to apply for the 'Help to Buy' tax rebate

'For a new home costing €100,000, some €5,000 can be claimed. For a €300,000 home, it's €15,000. For a home at €400,000, it's €20,000' (stock photo)
'For a new home costing €100,000, some €5,000 can be claimed. For a €300,000 home, it's €15,000. For a home at €400,000, it's €20,000' (stock photo)
Paul Melia

Paul Melia

The 'Help to Buy' incentive unveiled in Budget 2017 is designed to assist first-time buyers (FTBs) obtain the required deposit to secure a mortgage to buy or build a new home.

It provides a refund of income tax and DIRT - but not USC or PRSI - paid over the previous four years. Only the amount paid in tax can be claimed, up to a maximum of €20,000. It only applies to owner occupiers.

The Department of Finance said the USC paid will not be taken into consideration, because it would "undermine" the principle of it being applied to a broad base of incomes with few exceptions.

Housing Minister Simon Coveney expects the scheme to benefit between 4,000 and 6,000 FTBs next year. Here we outline how it will work.

1. What's it worth?

The relief is confined to a maximum of 5pc of the purchase price of a new home, or 5pc of the completion value of self-builds, which includes the site and house.

For a new home costing €100,000, some €5,000 can be claimed. For a €300,000 home, it's €15,000. For a home at €400,000, it's €20,000.

While the incentive also applies to more expensive properties, the relief is capped. Where a new home is valued between €400,000 and €600,000, the maximum relief will be €20,000 per property. No relief will be available for new purchases or self-builds costing over €600,000.

2. Who can claim?

Any FTB - or a couple or group - buying a new apartment, or buying or building a new house. But it cannot involve extending an existing property. For example, a person who builds a new house attached to an existing cottage does not qualify. A new build is defined by the Revenue Commissioners as one which has not been occupied in the past.

The person claiming the relief cannot - either individually or with joint applicants - have previously bought, built or inherited a property. The scheme is open to anyone who bought since July 19 last, and will apply until December 31, 2019. Those who paid a deposit or bought a property prior to July 19 last cannot make a claim.

You must take out a mortgage of at least 80pc of the value of the purchase price of the home, or 80pc of the valuation for a self-build approved by a mortgage lender. Cash buyers cannot avail of the scheme.

The main banks including Bank of Ireland, AIB and Ulster Bank will lend up to 80pc for a self-build home, but Permanent TSB will only lend 75pc. The bank said it is reviewing its mortgage lending rules.

The home must be occupied for at least five years from when it is deemed habitable.

3. How can I claim?

All FTBs must be registered with Revenue's online services - myAccount for PAYE workers, or ROS for self-assessed. They must be fully tax-compliant. If they have not already done so, they must complete online forms 12 (for PAYE) and 11 (for self-assessed) for the years 2012, 2013, 2014 and 2015. The scheme opens for applications from January 1 next.

4. What information do I need to make a claim?

The taxpayer must confirm a contract is signed, and a signed copy must be uploaded to the Revenue Commissioners' website. Confirmation that a booking deposit has been paid is likely to suffice, but this will not be confirmed until the Finance Bill is published next week.

The claimant must also set out the total deposit required, provide details of the property, the purchase price and date of purchase, the completion date, bank details, mortgage approval details, details of each FTB, the portion of the rebate to apply for each FTB and details of the developer or contractor. Once the claim is submitted, the details will need to be verified by the developer/contractor or FTB before the refund will be paid.

5. What about people who worked abroad in the last few years?

The relief is based on tax paid over the previous four years, but they may be eligible for some relief, for example if they worked in Ireland for one of the four years. For others, including retired people who pay no tax, they may be entitled to relief on DIRT which applies to savings.

6. How is the purchase price calculated for self-builds?

The applicable price for self-builds is based on the valuation approved by the mortgage provider. It generally includes the value of the site, and the home.

7. If I make an online claim in January 2017, how long will it take to receive the refund?

Claims will be subject to normal refund checks and criteria, according to Revenue. The Department of Finance said it was intended that applications would be processed "quickly" so as not to delay the property purchase.

Full details will be revealed in the Finance Bill.

Irish Independent

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