According to a survey carried out recently, 70% of us are planning on carrying out some repairs and renovations to our properties over the next 12 months. And if you are one of those, you may need to act faster than you had originally planned if you want to qualify for a tax break on the work you are carrying out, because in 69 days, the Home Renovation Incentive Scheme (HRIS) will come to an end.
The incentive, introduced in October 2013, provides tax relief for homeowners by way of an income tax credit at 13.5% on qualifying expenditure on the repair, renovation or improvement of works carried out on their home
The scheme will finish on December 31 2018. The only exception is if planning permission is required. If this is the case, planning permission must be in place by December 31, 2018, but you have until March 31, 2019 to complete and pay for the work.
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 €10,000 to HRI qualifying tradesmen which was broken down as follows: €6,000 (before VAT) to a builder to convert your attic; €3,000 (before VAT) to a carpenter for built-in wardrobes; €1,000 (before VAT) to a painter for painting work; Your HRI tax credit would be €10,000 x 13.5% = €1,350
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
So, the tax relief you can claim for effectively reduces the rate of VAT that would have otherwise applied to the works being carried out. Any work or costs incurred on your property that are subject to VAT at 23% are not covered, neither are items such as furniture, carpets etc. and if any work is grant-aided, then the qualifying expenditure will be reduced by three times the amount of the grant payment.
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.
To qualify for HRI you must ensure you engage a tax-compliant contractor who informs Revenue about the work and payments.
So, before work begins you should:
1. Tell the contractor that you will be applying for a tax credit under the HRI scheme for the work completed
2. 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
3. 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)
4. 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 this system to check the work details have been entered and entered correctly
After the work begins and when it’s completed: 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.
Liam Croke is MD of Harmonics Financial Ltd,
based in Plassey. He can be contacted at firstname.lastname@example.org or www.harmonics.ie