What Tax Relief is Available Under the Home Renovation Incentive?
All landlords have a legal duty to make sure their properties meet certain minimum physical standards. These standards were originally set back in 2008, but have since been updated, and came into force in July 2017.
These new standards include some additional requirements for rental properties, with respect to windows located above a certain height, the heating and ventilation of bathrooms, as well as the mandatory use of carbon monoxide detectors and alarms. If you are a landlord, it’s important to make sure you are still compliant.
Having to carry out some minor improvements to your rental properties presents a good opportunity to examine their overall condition and make improvements. Luckily, tax relief is available on home renovations, thanks to the Home Renovation Incentive, which supports landlords when they make improvements to their rental properties.
This article provides an overview of the updated minimum standards, and explains what the Home Renovation Incentive is, and what it includes.
What are the minimum standards for rental properties?
• The property must be in a proper state of structural repair
• It must be maintained in a sound state, both inside and out
• Electricity or gas supplies must be safe and in good repair
• Every room must have adequate ventilation, as well as natural and artificial light with windows located above a certain height must be fitted with safety restrictors
• Buildings with multiple units must have a mains-wired smoke alarm; a fire blanket; and an emergency evacuation plan in every unit and emergency lighting must be installed in all common areas
Private landlords must also provide the following:
• Washing machine
• Clothes-dryer (if the dwelling does not have private outdoor space)
• 4-ring hob with oven and grill, cooker hood or extractor fan, fridge and freezer or fridge-freezer & Microwave oven
• Kitchen cupboards that are suitable for storing food & sink with mains water supply, hot and cold water and draining area
• Separate room in each rented unit with working toilet, washbasin, and fixed bath or shower
• Fixed heating appliance that the tenant can control in every room (incl. bathroom)
• Fire blanket, smoke alarms and carbon monoxide detectors/alarms & access to vermin-proof and pest-proof refuse storage facilities
This might seem like a long list, but the good news is that tax relief can be claimed on a lot of these renovations, under the Home Renovation Incentive scheme.
What is the Home Renovation Incentive (HRI) Scheme?
The HRI scheme enables landlords to claim tax relief on repairs, renovations or improvement work carried out on their rental property. Work is subject to VAT at 13.5% and must be carried out by tax-compliant contractors. HRI is paid as a tax credit, at 13.5% of qualifying expenditure.
This can be set against your income tax over 2 years, effectively meaning you pay no VAT on qualifying work, up to a maximum value of €30,000.
What are the qualification criteria?
Work must have been carried out and paid for between 15 October 2014 and 31 December 2018. Qualifying work between 15 October 2014 and 31 December 2014 will be treated like it was carried out and paid for in 2015.
All repairs, renovations or improvements that were subject to VAT at 13.5% and carried out within the timeframe above are eligible. Anything can be claimed for; from basic maintenance, like rewiring, plumbing or plastering; to more cosmetic improvements, like landscape gardening and painting; all the way through to new wardrobes, bathrooms, kitchens, loft conversions and home extensions. Work on septic tanks, driveways, rainwater harvesting systems, and radon gas mitigation solutions also qualify.
Work that doesn’t qualify
Items like carpets, furniture and appliances, as well as services like architects’ fees do not qualify, as they are subject to VAT at 23%.
Minimum and maximum claims
To be eligible for HRI you must have spent at least €4,405 before VAT (€5k incl. VAT), which makes the minimum credit €595 at 13.5%. The maximum credit is €4,050, which is 13.5% of the maximum qualifying expenditure of €30,000. If you’re already claiming insurance or a grant for the renovations, the amount you can claim will be reduced.
Other mandatory conditions
Landlords have to be registered with the Residential Tenancies Board to qualify for the HRI scheme. They also have to be paying income tax, either through PAYE or Self-Assessment, and be up-to-date with all Local Property Tax (LPT) obligations.
Key Take Away
It is vitally important landlords make sure they are fully compliant with the updated housing standards. While this might be seen as a financial burden, it does provide an opportunity to make some tax-free improvements to properties, using the HRI scheme.
If you would like to talk to someone about the HRI scheme and how it affects landlord tax, or if you need help with your rental income tax returns, contact us online, or give us a call on +353 (0)59 8673894 anytime. Our friendly team of tax experts will be happy to help; and a standard income tax returns costs just €150 plus VAT.