Renovation costs can be put against tax

A tax incentive has been introduced to entice people to renovate their homes.

The scheme will be targeted at people willing to plough between €5,000 and €30,000 to extend or improve their properties.

It will cover all costs incurred in 2014 and 2015 and allow people to write off 13.5% of their investment from their tax bills over the subsequent two years.

Finance Minister Michael Noonan said the scope of work covered will be broad and should provide employment opportunities to out-of-work tradesmen.

A key feature of the programme, costed at €62m next year, will be all claims will have to be fully vouched and registered electronically with the Revenue Commissioners.

It has been designed to reduce the opportunities for construction workers to take advantage of the scheme with under-the-counter arrangements.

“Qualifying works include extensions and renovations to the home, window-fitting, plumbing, tiling, and plastering,” said Mr Noonan.

“This incentive will support fully tax compliant builders and will move activity out of the shadow economy into the legitimate economy.”

The home renovation incentive will be an income tax relief. This means what people claim will be deducted from their normal income tax bill. But the receipts will have to be properly registered and put through the books of the builder.

The measure received a broad welcome from the construction sector.

The Society of Chartered Surveyors of Ireland said the focus on tax compliant operators will remove the competitive advantage available to those who work in the black economy.

The president of the society, Michael O’Connor, said the measure would also help keep up standards in the industry.

“In the construction sector the effect of the shadow economy operators is detrimental and is having a negative impact on legitimate construction businesses by undermining their capacity to compete, risking their sustainability and potential to create jobs,” he said.

The Hardware Association Ireland, which represents building suppliers and materials’ stores, said the temporary incentive would have a knock-on effect for local economies.

The association said its sector employs 20,000 people who would benefit from materials bought by tradesmen hired to complete home improvements.

“This stimulus also has the major advantage of bringing construction activity out of the shadow economy, with huge benefits for the formal economy, given that the European Commission has estimated that between 16% and 17% of all construction and household repair work is undeclared,” it said.

Tom Parlon, of the Construction Industry Federation said the package, along with other schemes aimed at boosting onsite activity, would help a key employment sector in need of a boost.

“I would expect to see further growth with thousands of construction jobs being created on the back of the steps taken by the Government,” he said.