Have you been wanting to give your rental property a bit of a makeover, upgrade the bathroom or even a little landscaping?
Many landlords haven’t invested in renovations in their investment properties in recent years – mainly due to an inability to recoup the costs through rental income. We know it’s difficult enough to make a profit as an Irish landlord, but there is a scheme available to help reduce the cost of your improvement works.
What is the Home Renovation Incentive Scheme?
In October 2013, the Government launched the Home Renovation Incentive (HRI) Scheme for homeowners and later extended the Scheme to landlords in October 2014 in a bid to boost the building trade. The HRI gives tax relief on the VAT portion (13.5%) of a bill for repair, renovation or improvement works carried out by an authorised contractor. At this stage, the Scheme will run until 31st December 2015.
How It Works
The HRI Scheme provides tax relief by way of a tax credit to homeowners and landlords who undertake to repair, improve or renovate home or rental properties. 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 includes activities like:
- Painting and decorating,
- Tiling, plastering,
- Window replacement,
- Bathroom upgrades,
- Supply and fitting of kitchens,
- Attic conversions,
- Rewiring, extensions,
- Septic tank repair or replacement.
Of course, this list is not exhaustive, so 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.
How Much Can I Claim?
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 2015, you will receive the HRI tax credit during 2016 and 2017.
It is important to note that you won’t get a refund from Revenue but it will increase your tax credits. So, as with other tax credits, 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.
The Small Print
There are a few conditions that you need to be aware of when looking to apply for the Scheme.
- Minimum Spend: There is a minimum spend of €4,405 before VAT in one year (€5,000 including VAT). However, you don’t 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.
- Tax Compliance is vital: you and your contractor need to be tax compliant. That means a Tax Clearance certificate for your contractor and up-to-date tax returns, Local Property Tax, Household Charge and PRTB payments for you
- Exclusions: You cannot claim this credit on new builds or complete reconstruction of an uninhabitable house.
- Insurance Claims: If you are making an insurance claim please note that the qualifying expenditure is reduced by the amount of your claim received.
- Grants: Where grants are received, your qualifying expenditure is reduced by three times the amount of the grant.
- Apply Online: You must use the HRI online system to apply for the Scheme or you won’t be eligible. See details below
How to Apply
To apply, you need the cooperation of your contractor/s – but it basically involves 4 steps
Step 1 – Get a Quote/Invoice with the Contractors’ VAT number
Step 2 – Request your contractor/s to enter the works on the HRI Online System and check that they are entered before the works commence (or at least before you make the first payment).
Step 3 – Make sure our contractor/s enter each payment made. It’s not good enough just to keep copies of the receipts.
Step 4 – Once the works are complete and all payments have been entered by the contractor/s, you need to log into the HRI Online system to claim the tax credits. This means you will have to submit your claim via the HRI Online System after 1st January in the year following the works for the tax credits to be applied by Revenue.
I’m the expert when it comes to all things Rent at Red Oak. I’ve been working with our Rental Income clients for the past 3 years, so have seen just about everything – from shoeboxes of receipts to ‘the dog ate my homework’ style excuses. It doesn’t matter what state your rental records are in, I’ll get them sorted for you.