Use 'Dermot Bannon effect' to get tax back on home improvements
Home improvement scheme is about to end, warns Sinead Ryan
They're calling it the 'Dermot Bannon effect', but it's far more likely to be the 'Revenue effect' which has seen Irish home owners spend €1.737bn through the Home Renovation Initiative since its 2013 launch.
The scheme, which refunds VAT paid - in the form of an income tax credit - to people redesigning or upgrading their home, has been immensely popular; 107,386 home improvement projects have been undertaken with an average spend of €16,187 according to Construction Industry Federation figures. Its purpose was to provide a boost to a construction sector in the doldrums and also to encourage home-owners unable to move house to at least do up where they were.
The most popular works are home extensions (34pc), followed by general repair and renovations (25pc), new windows (10pc) and kitchen replacement (10pc).
With a building boom on again and banks eager to lend, it looks like the scheme will come to an end this year. So, how can you qualify and what do you need to do? Here's how to get started before the deadline.
For works costing between €4,405 and €30,000 (before VAT), the added VAT is refunded to you over two years. As VAT is charged at 13.5pc for building works, the benefit is between €595 - €4,050. If the work costs more than €30,000, you won't get any extra VAT relief.
* You must be a taxpayer to get tax relief. This may exclude pensioners, even those who pay USC if their income isn't sufficient to put them in the tax net. The benefit cannot be claimed by someone other than the home owner (e.g. an adult child).
* Landlords can apply.
* You must be up to date with your Property Tax payments.
* The spend must be exclusively on repair, renovation or improvements. You cannot get VAT back on soft furnishings, white goods etc, but painting and decorating is allowed.
* Professionals such as architects, solicitors, surveyors, etc, who charge VAT at 23pc do not qualify under the scheme, so their fees must be paid in full.
What Should You Do?
* Check your contractor(s) are registered for HRI. You both apply online with Revenue (www.revenue.ie) in advance of the work. The website has a list of registered builders.
* Multiple contractors can be used but the entire job must be within cost limits (see the example).
* Get several quotes for the work and personal recommendations are always valuable. Make sure that you have a time-scale, and payment schedule in writing from contractors and that their insurance certificate is valid.
Grant Aided Work
n If you are also applying for an SEAI grant (eg, for insulation or a boiler), three times the grant amount is deducted from the HRI application before you can claim.
John and Mary get some work done to their house. They decide to get new windows, convert two rooms into open plan, employ an interior designer, and get the lot painted. The total spend is €20,500 plus VAT, however the VAT for the interior designer is charged at 23pc for professional services and does not qualify under the HRI scheme. Soft furnishings and decorative elements do not qualify either. All their contractors are registered by Revenue as qualifying. Their refund calculation is as follows:
Conversion of rooms: €8,000 + VAT @13.5pc = €9,080
Interior Designer: €2,000 + VAT @ 23pc = €2,460
New kitchen: €7,500 + VAT @13.5pc = €8,512.50
Painting & Decorating: €3,000 + VAT @13.5pc = €3,405
Total Spend: €20,500 + Vat = €23,457.50
Vat Refund allowed: €2,497.50 (designer fees disallowed)
Repayment: €104.06 per month x 24 months