477B Home renovation incentive

Summary

This section was introduced initially to provide tax relief for homeowners by way of a tax credit at 13.5% of qualifying expenditure incurred on repair, renovation or improvement work carried out on an individual’s only or main residence. For homeowners, the scheme is due to run from 25 October 2013 to 31 December 2018. The Finance Act 2014 extended the relief to include rental properties. For landlords, the scheme is due to run from 15 October 2014 to 31 December 2018. In order to avail of the relief the landlord must register the tenancies on their properties with the Private Residential Tenancies Board (PRTB).

The Finance Act 2016 extended the relief to include tenants of local authority houses. Tenants who have received prior consent from the local authority to carry out works and who are liable to income tax can avail of the incentive from 1 January 2017.

Qualifying expenditure is expenditure subject to the 13.5% VAT rate. The work must cost a minimum of €4,050 excluding VAT (i.e. €5,000 including VAT). Where the cost of the work exceeds €30,000 (excluding VAT), only qualifying expenditure up to €30,000 (excluding VAT) will qualify for relief. Therefore, the minimum credit is €595 and the maximum credit is €4,050. If work is grant aided or, if any form of insurance or compensation is received in respect of the work, the amount of relief will be reduced accordingly. The credit is payable over the two years following the year in which the work is paid for.

Homeowners and landlords must be LPT compliant in order to qualify under the Incentive. The LPT requirement does not however apply to local authority tenants. Building contractors must be VAT registered and tax compliant in order to carry out works. The Incentive will be administered through Revenue’s online systems. Contractors will be required to inform Revenue in advance of details of works to be carried out and will also be required to notify Revenue in relation to any payments received in respect of works. Homeowners, local authority tenants, and landlords will be able to view the information provided to Revenue by the contractor through the Revenue online systems and will also claim the relief through those systems.

Details

Definitions

(1) “contractor” means a person engaged by an individual to carry out qualifying work, and who is an accountable person for VAT and has been assigned a VAT registration number;

“PPS number” means the individual’s personal public service number within the meaning of the Social Welfare Consolidation Act 2005;

“qualifying contractor” means a contractor who satisfies the obligations set out in section 530G or 530H i.e. he or she is zero or 20% rated for the purposes of Relevant Contracts Tax (RCT). However, in the case of a contractor to whom RCT does not apply, the contractor must satisfy the obligations set out in section 530G or 530H, other than the obligations referred to in paragraphs (a) and (b) of subsection (1) of those sections. Paragraph (a) is not relevant as it relates to being engaged in the business of carrying out relevant operations under RCT while paragraph (b) refers to operating from a fixed place of business. The latter requirement is not obligatory for the Home Renovation Incentive.

“qualifying expenditure” means expenditure incurred by the individual on qualifying work carried out by a qualifying contractor on a qualifying residence;

“qualifying residence” means a residential premises situated in the State–

• which is owned by the individual and which is occupied by the individual as his or her only or main residence; or
• which has previously been occupied as a residence and which has been acquired by the individual for the purposes of occupation by the individual as his or her only or main residence on completion of the qualifying work and which is so occupied upon completion.

From 15 October 2014 a ‘qualifying residence’ also includes a residential premises situated in the State-

• which is owned by an individual, occupied by a tenant and registered with the (PRTB); or
• which is owned by an individual, is intended to be occupied by a tenant, and is registered with the PRTB and occupied by a tenant within 6 months of completion of the qualifying work.

In short, from 15 October 2014 a ‘qualifying residence’ includes a rental property where the landlord is subject to income tax on the rental incomes.

From 1 January 2017, a ‘qualifying residence’ also includes a residential property which is owned by a local authority, occupied by a tenant who is paying rent for the property to the local authority and who has received prior written consent from the local authority to carry out works under HRI.

“qualifying work” means any work of repair, renovation or improvement to which the13.5% rate of VAT applies, and which is carried out on a qualifying residence;

“residential premises” means-

1. a building or part of a building used, or suitable for use, as a dwelling, and
2. land which the occupier of a building or part of a building used as a dwelling has for the occupier’s own occupation and enjoyment with that building or that part of a building as its garden or grounds of an ornamental nature;

“rental unit” means part of a building used, or suitable for use, as a dwelling, which is occupied by a tenant and registered with the PRTB, or which is intended to be occupied by a tenant, and is registered with the PRTB and occupied by a tenant within 6 months of completion of the qualifying works.

“specified amount”, in relation to a payment, means 13.5% of the amount of the VAT exclusive element of the payment, subject to a maximum amount of €4,050. Where more than one payment is made in respect of qualifying expenditure, the aggregate of the specified amounts in respect of those payments shall not exceed €4,050;

“tax reference number”, means in the case of an individual, the individual’s PPS number or in the case of a company, the reference number stated on any return of income form or notice of assessment issued to that company by the Revenue Commissioners;

“tenancy” has the same meaning as it has in the Residential Tenancies Act 2004

“tenant” has the same meaning as it has in the Residential Tenancies Act 2004

“unique reference number” has the meaning given to it by subsection (4)(b);

“VAT registration number” means the registration number assigned to the person under section 65 of the Value-Added Tax Consolidation Act 2010.

(1A) Where as a result of qualifying works carried out, a residential premises is converted into one or more rental units, each such rental unit is regarded as a ‘qualifying residence’. This is provided that each such rental unit is owned by a landlord, occupied by a tenant and registered with the (PRTB) or which is owned by a landlord, and is intended to be occupied by a tenant, and is registered with the PRTB and occupied by a tenant within 6 months of completion of the qualifying works.

Application

(2)(a)(i) This section applies to a principal private residence in respect of qualifying expenditure incurred on qualifying work carried out during the period from 25 October 2013 to 31 December 2018.

(2)(a)(ii) This section applies in respect of rental properties for qualifying expenditure incurred on qualifying work during the period from 15 October 2014 to 31 December 2018.

(2)(a)(iii) This section applies to a local authority property in respect of qualifying expenditure incurred on qualifying work carried out during the period from 1 January 2017 to 31 December 2018.

(2)(b) Where payments in respect of qualifying work on property principal private residence are made during the period from 25 October 2013 to 31 December 2013, those payments will be deemed to have been made in the year of assessment 2014.

(2)(c) Where payments in respect of qualifying work are made on a rental property during the period from 15 October 2014 to 31 December 2014, those payments will be deemed to have been made in the year of assessment 2015.

(2)(d) Where qualifying work for which planning permission is required is carried out during the period from 1 January 2019 to 31 March 2019, then provided such permission is granted on or before 31 December 2018, that work shall be deemed to have been carried out in the year of assessment 2018.

Relief (tax credit)

(3)(a)(i)& (ii) Where a claimant proves that in a year of assessment, he or she has made a payment or payments to a qualifying contractor or qualifying contractors in respect of qualifying expenditure, the claimant will have his or her income tax reduced as follows:

• in the first tax year after the tax year in which the payment is made (or deemed to be made) to the qualifying contractor, by the lower of-
  • 50 per cent of the relief due, and
  • the amount which reduces the income tax of that tax year to nil,
  and
• in the second tax year after the tax year in which the payment is made to the qualifying contractor, by an amount which is the lesser of-
  • that part of the relief due that was not used in the first tax year, and
  • the amount which reduces the income tax of that tax year to nil.

(3)(b) If relief due cannot be used in the first two tax years after the tax year in which the payment is made for the qualifying works, due to the insufficiency of income tax charged on the claimant in the those two tax years, this unused relief called “excess relief can be used to reduce the income tax liability in subsequent tax years until the relief is fully utilised. However, the amount of the excess relief used in any tax year cannot be greater than the amount which reduces the income tax charged on the claimant in that tax year to nil.

(3)(c) The maximum amount of relief available in respect of a qualifying residence is €4,050.

(3)(c)(a) Where qualifying work results in the conversion of a residential premises into more than one rental unit, the individual is entitled to the relief in respect of each such unit. This is provided that the premises is owned by a landlord, occupied by a tenant and registered with the (PRTB) or which is owned by a landlord, and is intended to be occupied by a tenant, and is registered with the PRTB and occupied by a tenant within 6 months of completion of the qualifying works.

(3)(d) A claim cannot be made until the total of all payments made to a qualifying contractor or qualifying contractors exceeds €5,000 (i.e. including VAT).

(3)(e) Where an individual engages a contractor to carry out qualifying work, it is the responsibility of that individual to satisfy himself or herself that the contractor is a qualifying contractor for the purposes of the Incentive.

Notification of work

(4)(a) The contractor must provide the following to the Revenue Commissioners before commencing qualifying work. The information required is:

1. the contractor’s name,
2. the contractor’s tax reference number and VAT registration number,
3. the Local Property Tax reference number of the property on which the qualifying work is to be carried out,
4. the name of the claimant,
5. the address of the property at which the work will be carried out,
6. a description of the work to be carried out,
7. the estimated cost of the work to be carried out, separately identifying the amount of VAT,
8. the estimated duration of the work, including the estimated start date and estimated end date, and
9. indicate if a property is a rental property and
10. where such property will be converted into more than one rental unit, the number of rental units.

(4)(b)(i) &(ii) When the Revenue Commissioners receive the information required, they will notify the contractor whether or not the contractor is or is not a qualifying contractor for the purposes of the Incentive. If the contractor is a qualifying contractor, the contractor will also receive a unique reference number for the work.

If the contractor is a qualifying contractor, the Revenue Commissioners will notify the property owner of this fact and this notification will also contain the unique reference number for the work.

(4)(c) If a qualifying contractor commences qualifying work before electronic systems are made available by the Revenue Commissioners, the contractor must provide the information required by subsection (4)(a) within 28 days of the electronic systems being made available.

Notification of payment

(5)(a)(i) A contractor must provide the following information to the Revenue Commissioners when the contractor receives payment for qualifying work from the claimant:

1. the contractor’s name,
2. the contractor’s tax reference number and VAT registration number,
3. the unique reference number for the work,
4. the amount of the payment, separately identifying the VAT element,
5. the name of the individual from whom the payment was received,
6. the date of the payment,

(5)(a)(ii) The contractor must also give a statement to the claimant showing the amount of the payment separately identifying the amount of VAT.

(5)(b) If a qualifying contractor receives a payment in respect of qualifying work before electronic systems are made available by the Revenue Commissioners, the contractor must provide the required information within 28 days of the electronic systems being made available.

Making a claim

(6)(a) A claimant must provide the following information to the Revenue Commissioners when making a claim:

1. the claimant’s name and tax reference number;
2. the unique reference number for the work,
3. the Local Property Tax reference number of the property on which the qualifying work was carried out, and
4. details of any grants, insurance or compensation received,
5. indicate if the property is a rental property, and
6. where a rental property is converted into more than one rental unit, the number of rental units and the address of each rental unit.

(6)(b) On making the claim, the claimant must make a declaration (where the following is the case) in relation to certain matters, namely that:

1. the amount of the payment that the contractor advised to the Revenue Commissioners accords with the amount of the payment made by the claimant to that contractor,
2. the date of the payment provided by the contractor is correct,
3. the work in respect of which payment was made was qualifying work carried out on the claimant’s qualifying residence,
4. the work in respect of which payment was made to the contractor has been completed,
5. the contractor has received full payment from the claimant in respect of the work, and
6. (I) the property on which the qualifying work was carried out was occupied by the individual as his or her only or main residence on completion of the work or,

(II) & (III) In the case of a rental property, the landlord must declare that each rental unit was occupied by a tenant within 6 months of completing the works and that each such tenancy is registered with the PRTB.

Grants, Insurance and compensation payments

(7)(i)&(ii) If a claimant has received or will receive, any amount directly or indirectly in respect of qualifying work-

1. from the State or from any public body or local authority, or
2. under any contract of insurance or by way of compensation or otherwise

then the amount of any payment or payments which are taken into account for the purposes of calculating the relief (tax credit) shall be reduced. Depending on the nature of the receipt, the reduction will apply as follows:

1. in the case of any amount received from the State or any public body or local authority, the reduction will be 3 times the amount received or receivable, and
2. in the case of a payment received under any contract of insurance or by way of compensation or otherwise, the reduction will be the amount received or receivable.

Local Property Tax compliance

(8)(a)(i) &(ii) Relief will not be given to a claimant unless all Local Property Tax obligations in respect of making returns and paying local property tax have been met in respect of (i) the qualifying residence and (ii) any other residential property in relation to which the claimant is a liable person.

(8)(c) The obligation to pay LPT does not apply in the case of a residential premises which is owned by a local authority.

Joint assessment

(9)(a) &(b) In cases of married couples and civil partners who are jointly assessed for income tax purposes, any payments made by the non assessable spouse/civil partner in respect of qualifying expenditure will be deemed to have been made by the assessable spouse/civil partner.

Electronic system

(10) Any claim, notification, information or declaration required by this section must be given by electronic means and through such electronic systems as the Revenue Commissioners may make available.

Joint owners

(11) Where qualifying expenditure on a qualifying residence is incurred by two or more claimants, then, except in the case of, a married couple or, civil partners who are jointly assessed, the specified amount shall be allocated among the claimants on the basis of the qualifying expenditure incurred by each claimant.

Prevention of double relief

(12) A claimant is not entitled to a deduction, relief, or allowance under this Incentive if he or she is entitled to a deduction, relief or allowance in respect of the same expenditure under any other provision of the Tax Acts.

This restriction is only confined to a principal private residence. It does not apply in the case of rental properties.

Revenue implementation

(13) Anything required to be done by or under this section by the Revenue Commissioners, other than the making of regulations, may be done by any Revenue officer.

Regulations

(14) The Revenue Commissioners may make regulations for the purposes of this section.

Relevant Date: Finance Act 2019