The Help to Buy Scheme
Since July 2020 the Government has provided an increased Tax Relief incentive to First-Time Buyers which they can obtain on purchasing or self-building a newly constructed dwelling house under the Help to Buy Scheme, provided they build or buy the house to live in as their home.
Under the Help to Buy Scheme, the maximum Relief available had been temporarily increased from €20,000 or 5% of the property value to €30,000 or 10% of the property value up to 31st December 2020. In the 2021 Budget, this increase was further extended up to 31st December 2021.
This is a very valuable relief and is only available for a limited period. There is a very good explanation of the Scheme on the Revenue Commissioners website: https://www.revenue.ie/en/property/help-to-buy-incentive/index.aspx
Your Tax Affairs must be in order!
It’s a Rebate so, you’re not going to get money for nothing – you have to be Tax compliant, meaning you’ll have to have made your Tax Returns for the previous four years. The Revenue Commissioners will not even entertain a Claim unless all your Tax Affairs are in order. If you are applying as a couple, you both have to be Tax compliant.
The Rebates that are available to you are based on what is called the ‘purchase value’. This is quite straightforward for a New Build: the purchase value is going to be your Contract price, which is the price agreed with the contractor. For a self-build, it’s a little different in that the purchase value is going to be the approved Valuation you get when you apply for your Mortgage from the Bank. You must take out your Mortgage with an approved lending institution and the criteria are very specific. For example, the loan you take out cannot be used for any other purpose other than that of building your home. Also, the loan must be a minimum of 70% of the completion value and this is known as the ‘loan to value’ ratio. For instance, if the purchase value of the house you built was €450,000, your loan would have to be a minimum of €315,000. It is more straightforward for a New Build because the Contract price is on your Contract for Sale, but when it comes to ‘loan to value’, that’s what purchase value then means.
Very importantly, the Contractor must be a Qualifying Contractor; otherwise, you will not qualify for the Scheme. There is a List of Qualifying Contractors on the Revenue Commissioners website.
How much can you claim?
If you sign a Contract for Sale or if you drew down the first-stage payment of your Mortgage between the 19th July 2016 or the 22nd July 2020 – the date prior to when the enhanced Help to Buy scheme came into effect – you can claim the lesser of the following: €20,000, 5% of the purchase value, or the amount of Income Tax or Deposit Interest Retention Tax you’ve paid in the previous four years. That’s for the period from the 19th July 2016 to the 22nd July 2020. If you sign a Contract for a new home or drawdown on a self-build Mortgage between 23rd July 2020 and 31st December 2021, you are eligible for the increased Relief – called Enhanced Relief.
This means that the Relief increases from 5% to 10% of the purchase value and it goes from €20,000 to €30,000, so it’s quite a substantial increase, but it’s only if you sign a Contract for Sale or draw down the first-stage payment of your mortgage within that strict time period. Unfortunately, if you applied for a drawdown of funds on the 22nd July, you’re not going to avail of the advanced Help to Buy scheme – you could lose out on €10,000 when there might only be 24 hours in the difference, but there has to be a cut-off point.
If you have already submitted an Application under the old rate are you entitled to the new rate?
Yes, under the assumption that your Contract has or will be signed between 23rd of July and 31st of December 2021. You simply need to cancel your Application and resubmit it. The Revenue are responding quickly to these resubmitted Applications.
How will the refund be paid?
This depends on the time of the Application. If you bought or built the property between the 19th July and 31st December 2016, the Refund was paid directly to the claimant. If you bought or built after the 1st January 2017, it is paid to the Qualifying Contractor.
How do you submit an Application?
The application is submitted through the Revenue Commissioners website. You need to log on to www.revenue.ie. There are different Applications for PAYE and self-employed. If you are PAYE, you go to the myAccount section and if you are self-employed you apply through ROS – the Revenue Online System.
Once you have submitted the Application, you’ll get a six-digit Application Number (Access Code) which you should retain carefully, because those Access Codes are passed either to the Contractor in the case of New Builds or to your solicitor in the case of self-builds.
The Claim stage only comes into effect once the Contract has been signed. You upload a copy of your Contract for Sale onto the Revenue Commissioners website through myAccount, or you provide proof that you’ve applied for your first-stage payment drawdown. Once again, this all needs to be verified by your Contractor or solicitor.
If anyone is thinking of applying at the moment, the process is slow because the Revenue Commissioners are issuing the Passwords by post, so it might be important to keep this in mind if you want to avail of the enhanced Help to Buy scheme.
Time passes quickly so it would be a good idea just to get the Application set up. It can sit there until you are ready to sign Contracts or drawdown, but as long as that Application stage is done you’re on the front foot.
Can Revenue clawback refund?
It is important to repeat the Clawback conditions stated on the Revenue Commissioners website:
Revenue can claw back refunds if:
- you were not entitled to the refund
- you do not live in the property for a minimum of five years
- you did not finish the process to buy the property
- you did not finish building the property.
Revenue can claw back refunds from the contractor if:
- the property is not bought by you within two years from when the refund was made to the contractor
- Revenue has reasonable grounds to believe that the property will not be bought by you within that two-year period.
There is some flexibility around the two-year period. This can apply if Revenue is satisfied that the property is either:
- almost complete at the end of the two years
- likely to be completed within a reasonable time period.
Once the residence is built and bought by you, you are solely responsible for meeting the conditions for the HTB refund. The developer is no longer responsible after this point.
For further information on Property matters you should contact:
Morgan McManus Solicitors