It’s surprising how many tax payers are unaware of the Home Renovation Incentive (HRI).
Statistics published by Revenue suggest just 59,000 properties benefitted from the scheme over the past four years.
For those who have claimed the HRI credit, the value to date has added up to a significant €62m.
The scheme has been in existence since 2013.
The essence of the scheme is that home owners can claim a tax credit worth up to 13.5% of their expenditure on repair, renovation or
improvement works on their home, over the two years following the year in which the expenditure is incurred.
The maximum credit available under the scheme is €4,050, equivalent to a spend of €30,000 plus VAT.
The minimum spend that will qualify for the credit is €5,000 including VAT, therefore the minimum credit at 13.5% of this amount is €595.
The average claim under the scheme has been around €15,947, generating a tax credit of just over €2,100.
About one third of the value of the claims to date has been in relation to home
extensions, with near 20% of claims being either for kitchen replacements or window replacements.
The spending limits can be spread amongst any number of contractors.
The scheme had been scheduled to expire on
December 31, 2015, however it was extended to cover works done up to December 21, 2018.
The scope of the scheme was also expanded, to include properties owned by landlords.
The scheme is a clever strategy by the Department of Finance to both support the construction industry in the form of incentivising an underutilised sector of the economy, while simultaneously driving out black economy operators.
Only “qualifying contractors”, those who are registered with Revenue for VAT and Relevant Contracts Tax, and who have an up-to-date tax clearance status, can partake in the scheme.
If you intend on availing of the scheme, it is imperative to ensure that your contractor is correctly registered with Revenue, because homeowners or landlords can’t claim the tax credit if the contractor’s details aren’t on the HRI online system used by qualifying contractors.
The contractor registers the HRI works on Revenue’s online system, using the tax payer’s local property tax identification number, and the tax payer subsequently claims a credit, also through ROS online.
Interestingly the scheme covers renovation works such as house extensions, addition of garages, laying of driveways, garden landscaping, replacement of windows, bathroom refurbishment, household painting or decorating.
Any repair, renovation or improvement carried out on a house subject to VAT at 13.5% can qualify for the tax rebate.
On the contrary, works subject to VAT at 23% do not qualify, such as replacement of furniture, or where the tax payer purchases the goods for the renovation directly themselves.
New builds, or complete reconstruction of an uninhabitable house, will not qualify for the credit.
To ensure a contractor is eligible, you should ensure the contractor is both registered for VAT and is tax compliant.
This can be evidenced by a valid tax clearance certificate and a VAT invoice, it is also important that detailed
receipts are obtained for each payment made to a contractor.
Importantly, the credit will only reduce a claimant’s tax liability where the claimant is liable for income tax in the first instance.
In a case where a claimant has insufficient income such that the HRI tax credits are not fully used, the unused tax credit can be carried forward to the following year. As always, each individual should obtain professional advice relevant to their own circumstances.