The help-to-buy incentive has been the focus of attention in the wake of Budget 2017 but especially since the scheme opened for applications in January but considerable confusion still surrounds the practicalities of how the relief will work.
Put simply, to avail of this scheme you must be a first-time buyer, your mortgage must be for at least 70% of the value of the property, the property cannot be valued at more than €500,000, it must be newly built – ie no second-hand homes – and buy-to-let properties are excluded, so you must live there yourself.
Purchases Before Jan 1st 2017
The rules are slightly different for houses bought or built between July 19th 2016 and Dec 31st 2016. These properties will be eligible for tax rebates on purchases up to €600,000 – but the rebate will still be limited to €20,000.
Bonus: If first time buyers also manage to take out a mortgage with cashback they could get even more cashback.
First Time Buyer – definition. Revenue say that…. “The first-time buyer must not have either individually or jointly with any other person (directly or indirectly), previously purchased, or built a property.” So – owning an inherited property should not exclude people from this scheme.
Help-to-buy rebate scheme Q&A:
How much will I get?
First time buyers can claim a tax rebate equal to 5% of the value of the new house they are buying from January 2017. The tax rebate of up to €20,000 will be available only to first time buyers to help them purchase a new home in Ireland. It is aimed at people who might not be able to afford to put down a 10% deposit in line with Central Bank Mortgage Rules.
The total tax rebate under scheme will be limited to the total income tax and DIRT paid over the previous four tax years and will be capped at €20k. If you have paid less than €20k income tax / DIRT in the past 4 years – the maximum rebate possible will be the amount of tax you paid.
When does the relief kick in?
The tax rebate can also be claimed on new homes that were bought since July 19th 2016. But – if you signed a contract to buy a property (or drew down the first tranche of the mortgage for a self-build) before 19th July 2016 you will not be eligible for the Help to Buy Scheme
I only came back to Ireland last year. Must I have paid four years of income tax to apply for a rebate?
You can apply if you have even one year of tax paid. You may not get a full rebate – it depends on how much tax you paid – but you could get some relief.
When can I apply and to whom?
Applications will be made to Revenue – but not yet. Although the relief applies to any homes bought since July 19th last, the system will not be up and running until January 1st next.
The precise form of the application is not yet clear but Revenue has said that those seeking the rebates will be obliged to file tax returns.
I’ve never filed a tax return. What’s that about?
Most PAYE taxpayers don’t routinely file tax returns unless they have non-PAYE income to disclose or additional reliefs to claim. However, Revenue says all help-to-buy applicants must file a Form 12 (the annual return for PAYE taxpayers) for each of the four years in which they want a rebate of their income tax to show they are fully tax compliant. To do so, they will first need to register with MyAccount, the Revenue’s online tax portal.
What exactly can I claim my rebate against? All my taxes?
The rebate can be claimed against any income tax and DIRT paid but you cannot claim a rebate of universal social charge (USC) or PRSI.
Will the rebate come in a lump sum and how long will it take to process approximately?
Yes, the rebate will be in a lump sum. The Department for Finance says it is not possible at this stage to estimate precisely how long it will take to process. “However, the intention is for applications to be processed quickly and efficiently so as not to delay or affect in any way the purchase of the property,” the department has stated.
Does it cover self-builds?
You can claim the relief on self-built homes. In that case, the relevant date is when the first tranche of your mortgage was drawn down.
Why must I take a 70 per cent mortgage out? I was trying to keep my mortgage as low as possible.
The Government view is that anyone who can afford to bear a bigger share of their mortgage is not in real need of support.
My partner is a first-time buyer but I am not. Are we eligible?
No, you’re not. Long-standing rules on first-time buyers set down that all parties to the purchase must be first-time homeowners. If anyone signing the contract has previously owned a property, no first-time relief applies.
Most new builds are miles from the centre of town. Why can’t I buy a second-hand home?
A large part of this relief is about getting the construction sector to build more homes. Current production is well below the demand for additional homes from a growing population in an average year. Second hand homes are out.
What about a property built in 2008 but never occupied?
Final details will only emerge later this month in the Finance Bill but the department says a new-build is a property that has not been occupied before, which would seem to indicate it might be okay.
Will I be restricted in what I can do with my home if I take a rebate?
Revenue has disclosed that there will be a clawback arrangement under which it will coming looking for some of your rebate if you stop being an owner occupier of a property under the scheme, ie you rent out the property. The same goes if they find out you were economical with the truth on any previous property ownership or were not fully tax compliant. And if they do seek a clawback, it won’t just be you on the hook. The Revenue says the homeowner(s) and the developer will be jointly and “severally” liable.
Clawback: The property must be occupied by the first-time buyer, or at least one of the first-time buyers in the case of multiple first-time buyers, for a period of five years from the date the property is habitable — otherwise some or all the rebate must be repaid. See Below …
Leave or sell within 1 year – 100% of rebate to be repaid.
Leave or sell within 2 years – 80% of rebate to be repaid.
Leave or sell within 3 years – 60% of rebate to be repaid.
Leave or sell within 4 years – 40% of rebate to be repaid.
Leave or sell within 5 years – 20% of rebate to be repaid.