The Home Renovation Incentive (HRI) scheme makes it possible for homeowners or landlords to claim tax relief on, renovations, repairs or home improvement work that is carried out on their main home or rental property. The work must be completed by tax-compliant contractors and is subject to 13.5% VAT.
The Home Renovation Scheme is refunded in the form of a tax credit of 13.5% of the expenditure in the repairs that qualifies. This is then offset against your income over the next two years. The 13.% tax credit effectively negates the Value Added Tax to zero on the qualifying work and it does so up the value of €30,000. The Scheme was introduced back in 2013 and for those interested, to qualify for the Home Renovation Scheme, the renovations to the property must be carried out between October 25th 2013 and 31 December 2018. The extension to 2018 was introduced in Budget 2017.
To qualify for the Home Renovation Scheme (or HRI) as an owner-occupier, the work must be carried out on your main home. Landlords can qualify in respect of work done on their rental properties too. Whether you are a homeowner or a landlord, you must be compliant with your Local Property Tax and also the Household Charge if it applies to you. You must also be paying income tax, either PAYE or Self Assessment to get the HRI. The contractor who wins your business must be fully tax compliant and also be registered for VAT in Ireland. If you are a contractor interested in the details of the HRI, the Revenue Commissioners have published some frequently asked questions on the Revenue.ie website. You can view them here: FAQs for contractors. If you have several contractors involved in the renovation or home improvement, such as a builder, plumber and an electrician, you combine the cost of the work completed by each to make up the qualifying amount.
Any contractor you use must be registered for Value Added Tax (VAT) in Ireland and be tax-compliant. Revenue has published. If several contractors, such as a builder, a plumber and an electrician, carry out qualifying work on your home or rental property, you can combine the cost of the works to make up the minimum qualifying amount. The qualifying work must cost at least €4,405 before VAT at 13.5%, which comes to a total of €5,000 with VAT included. You will only get the tax credit in relation to a maximum of €30,000 (before VAT) during the period covered by the HRI. The minimum credit is €595, based on the minimum qualifying expenditure of €4,405. The maximum is €4,050, based on the maximum qualifying expenditure of €30,000. If you are claiming a grant for the works, or if they are covered by an insurance claim, the amount of your expenditure that qualifies for HRI will be reduced.
What Work Qualifies?
As the name suggests, the work that qualifies is broad and involves most repairs, renovations or home improvement work that is subject to 13.5% VAT. This includes home extensions,the conversion of garages and attic to habitable spaces; the supply and fitting of new kitchens, upgrading of bathrooms and the fitting of built-in wardrobes to bedrooms. Also if you decide to fit new windows that is covered as is garden landscaping, plumbing, tiling, rewiring, plastering and painting. If you are having work done in septic tanks or on your home driveway, that is also covered. If you are planning on having work carried out and are wondering if it qualifies, the Revenue Commissioners recommend getting in touch to check. One thing that is not covered is any work carried out at the VAT rate of 23%. So if you involve an architect in the process, they will not be covered as they charge a VAT of 23%. Obviously, furniture, carpets or white goods do not qualify either.
In general, the tax credit is payable over the 2 years following the year in which the work is carried out and paid for. If you are on PAYE, your HRI tax credit will be divided evenly across your pay dates for each of the 2 years that it is payable. If you are a self-assessed taxpayer, it will be included in your self-assessment over 2 years, half the tax credit each year. For you to be able to claim the HRI credit, your contractor(s) must enter details of the work on the HRI online administration system. This system is only accessible to contractors who are registered for VAT and are tax-compliant. You are advised by the Revenue Commissioners to log in to HRI online (see ‘Where to apply’ below) to check that their contractors have correctly entered details of the works and payments.
Here is a checklist
- Ensure that you have paid or arranged to pay any Local Property Tax (LPT) or Household Charge that is due.
- Check that your contractor has a VAT number and is tax-compliant.
- Ensure that the work qualifies – see ‘Qualifying work’ above.
- Keep all supporting documentation – tax clearance certificates, estimates, receipts etc.
- Give the contractor the LPT Property ID of your property but not your LPT PIN or your Personal Public Service Number.
So if you are planning on carrying out home improvements in coming year, make sure and avail of the Home Renovation Scheme and the best of luck with it. When you have comepleted that extension, contact Blue Insurance for a very competitive quote on your home insurance. Just log on to Blue Insurance or call us on (01) 5135976. We look forward to talking to you.