What You Need To Know About The Home Renovation Incentive (HRI) Scheme
Finance (No. 2) Act 2013 introduced the Home Renovation Incentive (HRI) Scheme. This scheme was established to provide a measure of tax relief for tax payers who incur quailifying expenditure on the repair, renovation and/or improvement works on their home by a qualifying contractor.
Start With A Qualifying Contractor
A qualifying contractor for the HRI scheme is a tax compliant contractor who is registered for VAT. In order for you to obtain tax relief the contractor must submit the details of all qualifying works that will be carried out for you on the HRI online system. In order for the qualifying contractor to submit these details he will require the property ID reference for the qualifying home.
Check If Your Home Qualifies For The HRI Scheme
A qualifying home for the purposes of the HRI scheme is:
- Your main home which you must own and live in or
- A second hand home which you have acquired and which you will live in as your main residence after the work has been completed.
It should be noted that relief for the HRI scheme is never provided on rental properties, holiday homes, new builds or unhabitable houses which have been completely reconstructed.
Tick All The Boxes Before You Renovate
It is possible for the tax payer to review the HRI online system before any work is carried out, to ensure that the qualifying contractor has submitted the relevant details.
In order for the expenditure to qualify for relief, the following criteria must be met:
- The VAT rate relating to the expenditure must be 13.5%.
- Expenditure must be a minimum of €4,405 (before VAT is charged).
- The expenditure must be incurred on or after 25 October 2013 and up to and including 31 December 2015.
- The minimum qualifying expenditure can be a made up of a number of qualifying works incurred during the relevant period.
- The maximum amount of expenditure that relief maybe obtained for is €30,000 (before VAT is charged).
- The tax payers Local Property tax and Household charge must be up to date to qualify for the scheme.
- The contractor must be a HRI scheme qualifying contractor and must submit the qualifying work details on the HRI online system
How Does The HRI Work?
The relief provided by the HRI scheme is by way of a tax credit. The credit is calculated by multiplying the qualifying expenditure (before VAT is charged) by 13.5%. Therefore the minimum qualifying expenditure available is €4,405 by 13.5% = €595 and the maximum is €30,000 (before VAT is charged) is €30,000 by 13.5% = €4,050.
The tax credit may be claimed in the year following the year in which qualifying expenditure has been paid. The scheme provides that the credit is split and 50% of the credit is provided in each of the two years following the year the expenditure has been paid. If the tax credit is not fully utilised in any year, the unused HRI scheme tax credit may be claimed in the following year and carried forward until fully utilised.
Final Note
It should be noted that where a grant is provided for qualifying expenditure or the work is subject to an insurance claim, the qualifying expenditure will need to be adjusted.