Financial supports for building a home
There has been a notable increase in the numbers of people who have started the journey towards building their own home. Those have started down this road have many things to consider and organise. There are still quite a few who are unaware of two important schemes which could give them substantial money back at a time when resources are likely to be stretched. At Sweeney McHugh Solicitors we have been assisting many clients in relation to their stage payment mortgages which are traditionally used when carrying out a self-build. As part of this process we have been advising and assisting clients in relation to both the Help To Buy Scheme and the Stamp Duty Refund Scheme.
HELP TO BUY INCENTIVE
This applies both to the purchase of new properties or a new self-build property. If you are hoping to rely upon the incentive for the purchase of a new property you should ensure that the property qualifies before committing to the purchase.
When you are building a new property there are a number of criteria that you must meet to qualify for the relief:
To claim HTB, you must:
- be a first-time buyer
- buy or build a new property between 19 July 2016 and 31 December 2021
- live in the property as your main home for five years after you buy or build it
- be tax compliant, if you are self assessed you must also have tax clearance.
To qualify for HTB, the property that you build or buy must be:
- your home
- newly built with the construction subject to Value Added Tax (VAT) in Ireland.
Purchase value
The purchase value of a new build means the price that you bought it for. For self-built property, the purchase value is the approved valuation by the lender at the time that you took out the mortgage.
If you bought the property between 19 July 2016 and 31 December 2016, the purchase price must be €600,000 or less. If you bought it after 1 January 2017, it must be €500,000 or less.
Mortgage
You must take out your mortgage on the property with a qualifying lender. This loan must be used only for buying or building the property. The loan must be at least 70% of the purchase value of the property. This is known as the loan to value ratio.
You are allowed to have a guarantor on the loan.
How much can you claim?
The amount that you can claim is the lesser of:
- €20,000
- 5% of the purchase price of a new home. For self-builds this is 5% of the completion value of the property
- the amount of Income Tax and Deposit Interest Retention Tax (DIRT) you have paid in the four years before your purchase or self-build.
The maximum payment is €20,000 per property. This cap applies regardless of how many people enter into a contract to buy a house.
Universal Social Charge (USC) or Pay Related Social Insurance (PRSI) are not taken into account when calculating how much you can claim.
How will the refund be paid?
If you bought or built the property between 19 July 2016 and 31 December 2016, the refund will be paid directly to you.
If you buy a new build after 1 January 2017, the refund will be paid to the contractor.
If you self-build the property after 1 January 2017, the refund will be paid to a bank account you hold with your loan provider.
How do you apply for Help to Buy (HTB)?
Use myAccount or Revenue Online Service (ROS) to apply for HTB online.
There are two stages to the online process:
- the application stage
- the claim stage.
Application stage
You can apply as an individual, or part of a group that is buying or building a property. You must complete a declaration and select the years you want to use for a refund. If you are tax compliant, your application will be approved. You will be provided with an application number and a summary of the maximum amount you can claim. You will also be given a 6 digit access code separately through MyEnquiries.
Keep a safe note of both of these codes as you will need to provide them to your lender. If you are buying your home you will also need these codes for your qualifying contractor. If you are self-building you will need these codes for your solicitor. Your contractor or solicitor will require this information to verify what you have submitted.
If you make a HTB application but have not yet made a claim, your application will expire on 31 December. You can then re-apply and make a new HTB application.
Claim stage
You can make your claim once you have either:
- signed the contract for your home
- drawn down the first part of the mortgage if you are self building.
Login to HTB through myAccount or Revenue Online Service (ROS) and complete the following steps below.
Step 1
Upload evidence of your mortgage and the following information about your application:
- if you are buying a home: a copy of the signed contract
- if you are building a home:
- proof of the drawdown of the first part of the mortgage
- a copy of the valuation report from your lender.
Step 2
You will be asked to confirm details about the:
- property
- purchase price
- date of completion
- mortgage
- amount of deposit already paid.
If you are applying with other people you will also need to confirm the portion of the refund to be refunded to each person. If you are self-building, you will need to provide the BIC and IBAN of the loan bank account.
Once you have submitted your claim you will be provided with a claim reference.
Please ensure that you have carefully checked all the information you input before you sign and submit the claim.
If any of the information you have provided is incorrect, you must:
- cancel your claim
- submit a new claim with the correct information
This must be done before you continue to step 3.
Step 3
Once you have submitted your claim you should advise your developer or contractor (or solicitor if you are self-building).
Provide them with your claim reference (issued to you after step 2) and access code (issued to you when you submitted your application). Before you receive any refund, the information you have provided will need to be verified by the:
- developer or contractor, in the case of a new build
- solicitor acting on your behalf, in the case of a self-build.
The refund that you finally receive is limited to 5% of the purchase price of the house. This may mean that it is different to the maximum relief amount that you were given at application stage.
STAMP DUTY REFUND SCHEME
When you build a residential property on previously non-residential land you may qualify for a refund of some of the Stamp Duty paid when the land was purchased or transferred to you.
To qualify you would need to have paid stamp duty at the non-residential rate, currently 7.5% (6% pre 9th of October 2019). For single property developments the maximum area of your site that you can claim for is 0.4047 hectares (1 acre) therefore if your site was larger than this the relief available will be reduced.
The further requirements to make a claim are:
- You must submit a commencement notice for the building of the house and commence development in accordance with this. (NB It is important to keep a copy of the acknowledgement from the Council when you submit your commencement notice)
- You must start building within 30 months of the property being purchased or transferred to you.
- You must complete the property within 2 years after you commence.