July 8, 2014
Deputy John Deasy asked the Minister for Finance the number of applications that have been received and approved to date under the home renovation incentive scheme announced in Budget 2014; and if he will provide a breakdown of the take-up by county.
Reply from Minister Michael Noonan: When I introduced the Home Renovation Incentive in the Budget I had two main aims: to boost activity in the legitimate construction sector; to give a tax credit to homeowners for home renovation and similar work on their main private residence.
The Incentive was specifically designed in a way to facilitate the compliant construction sector, particularly at the lower end of the business by encouraging homeowners to invest in repairs/renovations on their main home. The incentive to homeowners is by way of a tax credit on works qualifying for VAT at the rate of 13.5% where they engage tax compliant contractors to carry out the renovation works. The tax credit is granted over the two years following the year the work is carried out and paid for, and an online system to enable homeowners to claim the credit will be available in January 2015.
The level of HRI activity is significant with the total number of works recorded on the Home Renovation Incentive System (HRI online) as at 6th July 2014 being 6,862 for a total estimated value of €114.9m carried out by 2,014 tax compliant contractors.
A breakdown by county is attached (some counties have been merged because of the relatively small numbers of properties involved for confidentiality purposes).
It should be noted that the estimated value of works can contain elements which will not qualify for the tax credit such as supplies at 23% VAT and works that exceed the upper limit of €30,000 (before VAT).
The introduction of HRI has seen an increase in home renovation activity and is contributing to a gradual pick up in employment and self employment activity in the construction sector. Contractors who have been out of the system should avail of the opportunities that HRI presents by ensuring their VAT and RCT registrations are active and tax affairs are up to date
I was very clear at the outset that the Incentive should support the legitimate trade and improve the competitiveness of legitimate contractors against those operating in the shadow economy. A key design feature of HRI is that it is based on an online contract and payment notification system that allows the contractor record the details of the work carried out and the payments made, as they are happening. The system also allows the homeowner check that the details are recorded and once they are recorded on the system the homeowner can be assured that the contractor is a legitimate tax compliant contractor.
The construction sector has gone through an unprecedented collapse. Data from Revenue's online Relevant Contracts Tax (eRCT) system first indicated a pick up in the sector in the Spring of last year. HRI online is now showing a pick up in activity in the home renovation sector. Both eRCT and HRI online will give a comprehensive overview of activity in the construction sector and will enable Revenue to develop additional compliance programmes to identify shadow economy activity within the construction sector. In this regard this is an opportune time for contractors who are operating in the shadow economy to register for tax purposes and to regularise their tax affairs and avail of the opportunities that will continue to come on stream in the construction sector.
It is also opportune to remind Homeowners who get work done by contractors, 'off the books', that they pay VAT on all materials used in the work so in reality a 'cash job' is never really 'VAT free', that they face additional risks in terms of consumer protection and that they may be facilitating tax evasion.