Further details on the Home Renovation Incentive (HRI) Scheme announced in Budget 2014 have been published by Revenue. We outline the main points below but recommend that the revenue website (https://www.revenue.ie/en/tax/it/reliefs/hri/) is consulted directly for the most up to date information.
The HRI scheme brings a most welcome boost to a struggling construction sector and offers a worthwhile incentive to those undertaking domestic renovation work…provided you can negotiate the finer details and eligibility criteria. The following should give you the main guidance needed to get started.
What sort of work is applicable?: The eligible works being undertaken must be for repair, renovation or improvement where the work is chargeable at the 13.5% VAT rate (ie, includes an element of labour or installation work). The scheme only applies to a home owner’s principal residence and does not apply to holiday homes, second homes or renovation of non-habitable dwellings. The work have started after 25th October 2013 and be completed by 31st December 2015 – this is extended slightly for works where planning permission is applied for before 31st December 2015.
How much is it worth to me? The minimum value that is subject to tax relief is €4,405 up to €30,000. This equates to an increase of PAYE tax credits of between €595 and €4,050. It is important to note that the relief only applies to PAYE tax payers and not an offset against the Universal Social Charge (USC) which is likely to exclude those on lower income levels from availing of the scheme.
How do I avail of the relief? Once the works start, the required documents must be submitted to revenue with 28 days. The online system to receive these applications is still not ready but expected to be operational in early April 2014. Back dated applications will be accepted by Revenue within 28 days of the April start date and any applications after that date will have to be submitted within 28 days in the normal way. The application must be submitted by the contractor along with information provided by the applicant or homeowner. Details of the application are then included in the subsequent year’s PAYE tax return by the homeowner. The relief is then split over two years so this is not an instant injection of funds for the homeowner during the works. For instance, if full relief of €4,050 is being sought for works started and completed in 2014 the relief will be split over subsequent tax returns in 2015 and 2016.
What paperwork is involved? The contractor undertaking the work must be VAT registered, fully tax compliant and registered through ROS. Before the works start the contractor must submit a Works Notification – this includes a Property I.D., the homeowner’s name, the works description, the estimated cost of the works (including a VAT breakdown) and the estimated start and completion dates for the works. This will give the homeowner the chance to verify that the contractor is HRI compliant before the works commence. Payment notifications are then submitted by the contractor after the works start and as they progress in accordance with the prescribed time limits. It is the responsibility of the contractor to submit paperwork accurately and on time otherwise the homeowner may lose out on the benefit of the scheme.
Some Frequently Asked Questions (FAQs)?
– The Home Renovation Incentive (HRI) Scheme can be availed of multiple times within the prescribed periods up to the total eligible amount of €30k. However, this applies to the property and jointly assessed taxpayers cannot double up on the benefits.
– The property and homeowner must be fully LPT (Local Property Tax) compliant to avail of the scheme.
– Works which are partly funded by an insurance claim are eligible however the amount of VAT relief is reduced by the amount of the insurance payment. For instance on works totalling €10,000 where €2,000 is funded by an insurance payout only €8,000 can be used against the HRI application.
– Works which are subject to SEAI or ‘Better Energy Homes’ Grant payments (https://www.seai.ie/Grants/Better_energy_homes/) are also eligible. However the amount of VAT relief is reduced by three times the amount of the SEAI grant. For instance, external wall insulation (EWI) works totalling €20,000 where a grant of €2,700 (semi-detached house grant) is availed of will have the eligible amount deducted by €2,700 x 3 or €8,100 thus reducing the eligible amount for HRI purposes to €11,900.
– Relief is not available on any products or services charged at the 23% VAT rate. For instance if you purchase an IKEA kitchen to install yourself this will not be applicable nor will any relief on professional fees (architects or engineers) or planning financial contributions etc.
How can Bright Design Architects help? We always strive to deliver the best value possible for our clients and availing of the Home Renovation Incentive (HRI) Scheme is part of that service. The contractors we work with are subject to RIAI building contracts, they possess good management skills and are tax compliant – therefore this extra level of paperwork should not prove too daunting. However, as it is a new incentive we undertake to assist both the homeowner and contractor insofar as is possible with the application process.
The Verdict? The financial benefits are obvious and it will inject more activity and confidence into the sector however the process and paperwork is less than straightforward. The length of time it takes to receive the benefit and the halving of it over two subsequent years reduces the incentive and removes any short term or immediate cash flow benefit.
Until the online launch date is confirmed in April the above information remains subject to change and is only a brief overview or summary. Therefore reference should be made to the revenue website and all current information published at time of enquiry. No responsibility will be taken by Bright Design Architects for any error or omission in the foregoing which is offered in goodwill.