In its budget submission of October 2013, the government announced an incentive scheme, called the Home Renovation Incentive Scheme (HRI) which would allow homeowners claim tax relief on work carried out for repairs, renovations or improvements to their principal primary residence. The incentive would run from October 25 2013 and end on December 31 2015.
In October 2014, the same incentive was extended to landlords who carry out work on their rental properties.
The HRI has proven to be very successful since its introduction, and as of September 15, according to Revenues HRI online system, work on 36,543 properties have been carried out valued at c. €566 million involving some 5,975 contractors.
The really good news is that because the incentive has been such a success, it is being extended by a year to December 2016.
The scheme basically provides a tax relief on work carried out on your property by a tax compliant contractor, and a tax credit at a rate of 13.5% is allowed on the cost on all qualifying expenditure over €5,000 (inclusive of VAT), up to a maximum of €30,000. If, for example you had work carried out that amounted to in total €9,000 which was broken down as follows:
€5,000 (before VAT) to a HRI qualifying builder to convert your attic
€3,000 (before VAT) to a HRI qualifying carpenter for built-in wardrobes
€1,000 (before VAT) to a HRI qualifying painter for painting work
Your HRI tax credit would be €9,000 x 13.5% = €1,215
And if you had more extensive works carried out on your property to the value of €30,000 or more, then your tax credit would amount to €4,050 (€30,000 x 13.5%) which is the maximum tax relief available.
The type of work carried out on your property that qualifies for HRI relief has to be subject to 13.5% VAT, which typically is work that would include the following: Painting and decorating; rewiring; tiling; supply and fitting of kitchens; extensions; garages; landscaping; supply and fitting of solar panels; conservatories; plastering; plumbing; bathroom upgrades; supply and fitting of windows and doors; attic conversions; driveways; septic tank repair or replacement; central heating system report or upgrade; supply and fitting of built-in wardrobes.
Any work or costs incurred on your property that are subject to VAT at 23% are not covered, neither are items such as furniture or carpets. If any work being carried out is grant aided then the qualifying expenditure will be reduced by three times the amount of the grant payment.
In order to qualify for this HRI tax credit, homeowners must be property tax compliant while building contractors must be tax compliant in order to carry out works.
The tax credit given is offset against your income tax over the two years following the year in which the work is carried out. If you pay tax through the PAYE system, your HRI tax credit will be divided evenly across your pay dates for each of the two years that it is payable. And if you are a self-assessed tax payer, then it will be included in your self-assessment over two years, half the tax credit each year.
In the case of joint ownership i.e. non married couple, the maximum tax credit applies to the property but the owners of the property can opt to split the tax credit between them.
In practice, you should tell the contractor that you will be applying for a tax credit under the HRI scheme for the work completed.
Ask the contractor to confirm that they are participating in the scheme and will enter the details of the work on the HRI online system. What you should request from them at this stage is (a) their VAT number (any trader must be registered for VAT) and (b) a tax clearance certificate for the current year
The contractor will need from you, your property tax ID number which can be found on any correspondence relating to the local property tax (LPT)
Your contractor will enter this number on the Revenue’s electronic HRI system along with an estimated cost of works, the name of person claiming the HRI i.e. you, a description of the works, estimated start and completion dates etc. in order to register your work for tax relief. You can log on to check that the work details have been entered and entered correctly
After the work is carried out to your satisfaction, you will go online, the year after the qualifying work has been carried out and paid for, and confirm the work has been completed where you will give your tax details, and Revenue will then arrange for the tax relief to commence the following year
Qualifying work carried out and paid for between October 15 2014 and December 31 2014 will be treated as if it was paid for in 2015 for tax credit purposes for Landlords and claims for 2014 can be made by homeowners through the HRI online system from the 13th January 2015 and the tax credit will be given in 2015 and 2016.
Claims for 2015 can be made through HRI online from January 2016 and tax relief will be given from that year and 2017.