Last month, we published an article on the Home Renovation Incentive Scheme which commented on some of the challenges the new scheme posed for tax payers. Since then, Revenue has released new positive developments in the scheme which aim to make the process simpler for homeowners. They got in touch with us last week to explain the key changes, as outlined in their response to our article below.
From our perspective, the main change is that the onus is no longer on the homeowner to request a copy of the contractor’s RCT certificate or a Tax Clearance Certificate, however the contractor still needs to be VAT registered and tax compliant. We look forward to looking into this in more detail and updating you on the new system.
Our thanks to Pat Molan from Revenue for engaging with us on this issue.
Read Revenue’s response about the new developments for the Home Renovation Incentive Scheme
Firstly, thanks for the opportunity to give a Revenue response to your article on the Home Renovation Incentive. You are aware that Revenue recently announced the launch of the new electronic system to administer the Home Renovation Incentive (HRI). The system is now available to both contractors and homeowners. The online system is easy to use and has already attracted a high level of use, particularly by contractors who are recording qualifying works and payments.
The HRI online system is simple to use and allows tax compliant contractors to enter details of qualifying works and payments through the Home Renovation Incentive link on the Revenue On-Line Service (ROS)
The homeowner can then “look up” qualifying works and payment details through the HRI online link on www.revenue.ie. By viewing the qualifying works and payments online, the homeowner can see that the contactor is a qualifying contractor and doesn’t need to look for tax clearance certificates or any other proof of tax compliance.
Instructional video’s for both contractors and homeowners on how to use the simple HRI system are now available on Revenue’s website.
The scheme itself provides for a new tax credit for homeowners. It will be given by way of an Income Tax credit at 13.5% of qualifying expenditure incurred on repair, renovation or improvement work carried out by tax compliant contractors on a homeowner’s principal private residence. You are correct that the credit will not be refunded but spread evenly over the two years following the year in which the works are completed and paid for.
A tax credit of up to €4,050 is not insignificant and there has been considerable interest expressed by homeowners in availing of the tax credit. The works can be carried out as a single job or multiple jobs with multiple contractors, once the minimum amount of €4,405 has been reached.
You must remember that the Incentive has three broad objectives,
- To incentivise the construction sector, particularly for smaller contractors
- To incentivise homeowners to invest in qualifying works on their main home through the application of the tax credit
- To address elements of the shadow economy and level the playing pitch by rewarding tax compliant contractors, who can participate in the Incentive.
The incentive allows tax compliant contractors and the legitimate trade to compete with shadow economy contractors and will provide employment and business opportunities for contractors in the home renovation sector. Homeowners will qualify for a tax credit at 13.5%, effectively reducing the rate of VAT to zero. Furthermore, where a Homeowner uses an unregistered contractor, they also suffer VAT on the materials and other inputs, whereas registered contractors will include these in the total cost. The homeowner is rewarded for engaging tax compliant contractors and tax compliant contractors will have the opportunity to compete aggressively with “rogue” operators.
Revenue are currently in the process of alerting homeowners who had HRI qualifying work carried out and paid for since 25th October 2013 to contact their contractors and ensure they enter the details to HRI online
It is important to point out that the homeowner won’t be able to claim the HRI tax credit if the details are not on HRI online.
You mention in your article that deductions are made where grants or compensation is paid on works qualifying for the Home Renovation Incentive. This is correct and it is normal practice to only cover any qualifying expenditure once. For example, if you receive insurance payments for medical treatment, only the remaining expenditure after deducting the insurance payment, is covered for tax relief. The same principle applies to HRI. However, where the amount on which relief is granted is reduced, the qualifying expenditure for the purposes of meeting the minimum threshold in HRI is not.
An updated guide on the Incentive and updated Frequently Asked Questions are available on www.revenue.ie.
Finally, Revenue sees the new system as a simple, modern and efficient addition to our tax system that will support tax compliant contractors and allow homeowners to view works and payments and towards the end of the year, allow them to submit their applications for tax credits.
Response supplied by Pat Molan from Revenue