Fix those Windows! Many PAYE Taxpayers will use the Home Renovation Incentive scheme to help pay for necessary updates to their homes.

Guide to Home Renovation Incentive Scheme 2014

With the beginning of Spring and the weather improving you may be thinking of carrying out some home improvements? If so why not avail of some tax relief under the new Home Renovation Incentive Scheme.

The Home Renovation Incentive (HRI) Scheme was introduced in Budget 2014 and will run from 25th October 2013 to 31st December 2015.

This Scheme provides tax relief by way of a tax credit to homeowners who undertake to repair, improve or renovate their principal private residence. The credit is 13.5% of your qualifying expenditure. Qualifying expenditure is the amount you pay a contractor before VAT so you are effectively getting relief on the VAT paid by you to the contractor.

Qualifying Expenditure would include:

• Painting and decorating,
• Tiling, plastering,
• Plumbing,
• Window replacement,
• Bathroom upgrades,
• Supply and fitting of kitchens,
• Attic conversions,
• Garages,
• Rewiring, extensions,
• Landscaping,
• Driveways,
• Septic tank repair or replacement.

This list is not exhaustive and if you are unsure you can contact your local tax office before works commence and they will advise you if the project is eligible or not.

What conditions do I need to fulfill in order to qualify and how much relief can I claim?

There is a minimum spend of €4,405 before VAT on the project before relief will be granted. This will give you €595 in tax credits.   The maximum tax credit available is €4,050 (€30,000 at 13.5%). The relief is claimed back over 2 years following the year in which the work was carried out. So for example, for work carried out in 2014, you will receive the HRI tax credit during 2015 and 2016. This scheme will not provide you with a refund from Revenue but it will increase your tax credits. It is important to note that as it is a tax credit, you must have earned enough and paid tax in order to benefit. If you haven’t paid enough tax to cover the amount of the relief you can carry the credit forward to future years when you may be able to utilise it. Finally, the tax credit applies only to income tax paid, not to USC or PRSI.

Who can carry out work under HRI Scheme?

In order to avail of the relief, you must engage a VAT registered contractor and you must ensure that the contractor’s tax affairs are in order. In order to comply with this you will need to ask your Contractors for:

• An Invoice or Quote that provides the Contractors name and VAT number and
• An up to date tax clearance certificate which is in date at the time of the commencement of the work or
• A Relevant Contracts Tax (RCT) rate notification letter. Note the date on this must be no more than 30 days before the work starts and also you need to ensure that the RCT determined rate must be zero or 20%.

As a tip I would advise to ask for the Tax Clearance Certificate over the RCT rate Notification letter as you only need to check that date is still valid.

How can I prove I paid for the Work?

You should always request a VAT receipt for any payments you make to your contractor. This receipt should show the name, date of payment, amount of payment and the VAT rate and VAT charged.

How do I apply to claim the relief?

Your Contractors will enter the details of the work, location, cost excluding VAT and VAT details on to the electronic HRI System. You the Homeowners will only be able to claim the credit if all payments and work details are entered. You can only claim this credit from January 2015 and as of yet we do not have full details. Revenue have stated that they will publish further information closer to this time.

Handy Points to Note:

• Watch for the minimum spend. It needs to be €5,000 as this will be your VAT inclusive amount.
• Your PAYE must be up to date as well as your Local Property Tax and Household Charge.
• You cannot claim this credit on rental or investment properties, new builds or complete reconstruction of an uninhabitable house.
• You will need to give your contractor your Property ID. Do not give them your PPS number or PIN you received in connection with your Local Property Tax.
• If you are making an insurance claim please note that the qualifying expenditure is reduced by the amount of your claim amount received and also where grants are received your qualifying expenditure is reduced by three times the amount of the grant.
• You do not have to spend the total €5,000 with the same contractor. Over the course of a year you can use a different tradesmen. As long as each is a qualifying contractor and you spend a total of €5,000 within the year, this qualifies for tax relief.
• Where planning permission is received before 31st December 2015, work paid for up to 31 March 2016 will qualify.

Grainne Lyng,

Tax Manager, Red Oak Tax Refunds.