Table of Contents
Home Renovation Scheme
The home renovation incentive scheme provided a tax credit at 13.5% of expenditure incurred by home owners between 25 October 2013 and 31 December 2018 on the repair, renovation and improvement of a principal private residence.
An individual could claim a tax credit in respect of payments to a qualifying contractor of qualifying expenditure. The person’s income was reduced by claiming a credit over the two-year period following which the work is done.
A contractor is a person carrying on a Vatable activity to which the 13.5% rate of VAT applies. A contractor must be engaged in the supply of goods and services in Ireland have a VAT registration number and up-to-date notice of determination of 0% or 20% RCT rate. This effectively requires tax compliance status.
The amount qualifying for relief is the VAT element of the payment subject to a minimum tax credit of €595 and maximum tax credit of €4050. This accordingly requires expenditure of between €5,000 and €30,000.
HRI Conditions
The contractor before commencing qualifying work must provide information to the Revenue via an electronic system. This must set out the contractor’s name, tax reference number and the unique identification number for the property where the work is to be carried out, the name of the contractor who is liable for LPT, the address, description of work, estimated cost and estimated duration.
On receipt, Revenue is to notify whether or not it is a qualifying contractor and give a unique reference number for the work. Within seven days of receiving payment for the work the contractor must return information to the Revenue including the amount of the payment and date of payment.
The claimant must provide details in relation to a number of matters on making the claim, including tax reference number, unique reference for the work, unique reference for LPT, information in relation to any grant or insurance sum received. A declaration must be made in respect of each payment in relation to various matters.
Changes
Finance Act 2014 extended the scheme to the expenditure on certain residential premises is covered up to the end of 2015.
The definition of a qualifying residence is amended to include a qualifying residence situated in the State owned by an individual and occupied by tenant under a tendency registered with the PRTB or which is owned by the individual and is registered with PRTB and occupied by the tenant within six months of completion of the qualifying work.
Where there is a conversion into multiple residential units, each may be a qualifying residence. The maximum amount of relief is €4,050 in respect of each unit. The minimum expenditure is €5,000 plus VAT per unit.
The expenditure must be incurred on qualifying work to which VAT applies. The contractor must provide Revenue prior to commencement of work with certain information. The declaration must be made within six months of completion of the work, confirming the tenancy. The property must be rented out to tenants registered with PRTB. The relief applies to 35% of the payment in relation to which VAT is charged. It is limited to the lower of 50% of the relief or the tax paid in each of the subsequent years.
Finance Act 2015 extended the Home Renovation Scheme was extended to the 31 December 2016 or 31 March 2017, where planning permission is in place at that date. Works carried out before 31 March 2017 were deemed to qualify under the scheme.
The scheme provides an income tax credit of 13.5% of home renovation expenses, of at least €5000 to a maximum of €30,000. It is spread over two years. Effectively, it refunds the VAT on such payment. It applies to payments subject to VAT.
Finance Act 2016 extended the home renovation initiative scheme to the end of 2018. This is extended further to 2019 if permission is granted by the end of 2018, provided works are done before 1st April 2019. The provision is also extended to tenants’ and occupants’ of properties owned and rented by local authorities, subject to conditions.
Help to Buy scheme
The Finance Act 2016 introduced the help to buy scheme. It is open to first-time buyers until the end of 2021. They are persons who have not either alone or jointly purchased a residential property or previously built their own dwelling. Where there are several persons purchasing, each must qualify as a first time buyer.
A qualifying contractor is one who has complied with his relevant contract tax obligation and has an RCT rate of zero or twenty percent, has a tax clearance certificate and provides certain details in relation to certain sales.
A qualifying residence is one not previously used or suitable for use, which is occupied as the sole or main residence of the first time buyer on which construction work is undertaken subject to VAT of 13.5 percent, and where the price is not higher than €500,000 (€600,000 before 2017). There is provision for a self-built qualifying residence, which must be both directly and indirectly by the first time buyer.
Help to Buy Rebate
A rebate of income tax up to 5 percent of the price or value of up to €500,000 is provided for. The relief is available provided that a mortgage is put in place for a minimum of 70 percent of the price or valuation in the case of a built house.
The first time buyer is entitled to a rebate of the lower of
- €20,000
- total income tax payable in the immediate four years before
- five percent of the price or purchase value.
For contracts between 23 July 2020 and 31 December 2021, where the first instalment of the loan is drawn down between those dates, the rebate is the lower of
- €30,000
- Total income tax payable in the immediate four years before
- 10% of the price or purchase value
Prior to 2016, the payment was made to the buyer but is thereafter made to the qualifying contractor and is deemed part payment in respect of the house purchase. Applicants who are self-assessed must be fully tax-complaint.
Clawback
A clawback applies if the property ceases to be the main residence of the applicant within five years. This scales back from a full clawback in the first year, reducing by 20 percent each year until it is up to the rate of 20 percent in year five. It is due within 3 months of cessation of occupation.
Clawback also applies if a new qualifying residence is not purchased within two years of payment or Revenue is of the opinion that will not be so purchased or in the case of self-builds, completed.
Start a Business Relief
The Finance Act (No.2) Act 2013 provides for relief on tax on profits in the first three years in the case of certain businesses set up by persons who have been unemployed. The scheme expired on 31 December 2018.
An amount up to €40,000 could be deducted in the calculation of trading or professional services income within the first two years of commencement of the new business. The deduction took place before losses and capital allowances. It applies against income tax. It is not available against USC and PRSI. It reduces taxable profits but does not create a loss.
The individual concerned must have been unemployed for 12 months preceding the commencement of the business and be entitled to credits during that period or has been in receipt of jobseekers benefit or allowance or one parent family credit.
It must not be a business which was previously carried on by another person to which the individual has succeeded or which were previously carried on as part of another person’s business or trade.
Attendance at certain training courses approved by the Minister for Social Protection or Education and Skills is deemed to be continuous unemployment for the purpose of the relief. A person may only qualify for the relief once the relief is granted in priority to relief for losses.
Living City Initiative
The living city initiative applies to special regeneration areas in Dublin, Galway Limerick Waterford and Kilkenny. The Living City initiative was amended by Finance (No.2) Act 2013 to apply to houses constructed prior to 1915. Formerly, it applied to houses constructed between 1714 and 1830. It is to be extended to certain areas of Cork, Kilkenny, Galway and Dublin.
The Living City Initiative was amended by the Finance Act 2014. A relevant house is a house built before 1915 for use as a dwelling. The former requirement that it be two- storey is removed.
At least €5000 must be spent on property during the life of the scheme. A letter of certification is required.
Owner occupiers 10% of the cost of works up to €400,000 may be claimed as a deduction against income over 10 years. If the property ceases to be the person’s sole or main residence in that period, relief is no longer available. There is no claw back. The relief is not available to a successor.
50% relief applies to newly constructed dwellings. 100% relief applies to refurbished and converted dwellings. Other occupiers could also rent a room.
LCI Conditions
Conditions apply to the continuance of the property as a qualifying property. It may cease to be a qualifying property If the conditions are no longer met.
Owner occupiers must be individuals who have incurred expenditure on the purchase, construction, conversion or refurbishment of the qualifying residential property. He or she must use it as their sole or main residence.
A landlord of residential property was entitled to relief on the same conditions provided that the property is rented and used as a home by a tenant.
Relief is also available on the property is use for commercial purposes, retail or the provision of services in Ireland. It is also available where it is rented for that purpose.
An expenditure limited of €400,000 is applicable to individuals and €1.6 million to companies.
A qualifying premises is a building or structure wholly within a special regeneration area which is not otherwise an industrial building and is in use for the purpose of retailing of goods within the state or let on bona fide commercial terms for such use. It does not include a dwelling house or part of a dwelling house. The maximum relief for the project is €200,000 for companies and €100,000 for individuals.
Changes to Scheme
Finance Act 2016 amends the Living City Initiative extends the relief to landlords in relation to renovation of residential accommodation in regeneration areas. The floor size restriction was removed. The minimum required expenditure is €5,000.
The expenditure is available by way of capital allowance to lessors in expenditure on conversion and refurbishment of qualifying premises (houses) prior to 4th May 2020. The existing rules for commercial lessors are available over 7 years.
Qualifying premises are those within a special regeneration area (centres of Dublin, Cork, limerick, Waterford Kilkenny and used solely as a dwelling certified by the local authority and used by the individual after refurbishment as his sole or main residence.
Certain information must be finished to the Revenue. Relief is restricted under EU state aid rules to €800,000 for a company and € 400,000 for a natural person.
Finance Act 2016 provides for reduced allowances for lessors of commercial property. The minimum amount of expenditure is €5,000. State grants do not preclude the relief, but the relief is reduced by three times the amount of the grant received for lessors of residential premises or commercial premises.
Film Relief Compliance Measures
FA 2012 has measures aimed at encouraging compliance by qualifying companies availing of film relief. Revenue must become furnished with a compliance report on completion of the film. There is a penalty on directors and other officers if they fail to do so.
Film relief is amended by FA2 2013 so that the eligible individual qualifies for relief regardless of whether or not he is resident. This facilitates employment of non-EU persons so that monies can be spent on such persons and are qualified for the relief regardless of where they are resident. An eligible relief is an individual employed by a qualifying company for the purpose of production of a qualifying film.
Section 25 provides for a withholding tax on payments made by companies qualifying for film relief in respect of payments to performing artists who are resident outside EU/EEA. The tax is deducted at the standard rate. The company must issue a deduction certificate and make returns electronically. The tax deducted is not available for refunds. Allowable expenses are not subject to the withholding tax. The provision will commence upon making of appropriate ministerial orders
Reporting
The EU state aid rules require the state to provide the EU Commission with reports and summaries of each state aid. EII companies and designated fund managers must provide Revenue with information required for the State to comply with this obligation.
Financial Act 2016 increases the reporting obligations to require details of company particulars, EII, finance, particulars of share issue and relief. Revenue may publish details of companies who raise EII funds notwithstanding other confidentiality provisions.