Home Renovation Incentive relief rate increase

QUESTION

To ask the Minister for Finance the estimated first and full year cost of increasing the home renovation incentive relief rate by 1.5% intervals up to 20%; and if he will make a statement on the matter.

REPLY

The Home Renovation Incentive (HRI) is a scheme that allows home owners, landlords and local authority tenants to claim tax relief on qualifying works. The works must be completed by a tax-compliant contractor and be subject to 13.5% VAT. The HRI relief is paid in the form of a tax credit at 13.5% of qualifying expenditure, which can be set against Income Tax evenly over two years, provided the claimant has paid enough tax in each of the two years to claim it back. Where the full use of the credit cannot be made in those two years, the credit will be carried forward to later years. This rate of 13.5% is in line with the VAT rate so that it effectively reduces the rate of VAT to zero on qualifying works. HRI can be applied for up to 4 years after the qualifying works have been completed.

The additional costs of increases to the relief in the manner outlined by the Deputy are set out in the table below:
                                                                  (€ Million)                            (€ Million)
Rate of Relief                                          First Year                             Full Year
13.5%                                                       0                                           0
15.0%                                                       1.3                                        2.5
16.5%                                                       2.5                                        5.1
18.0%                                                       3.8                                        7.6
19.5%                                                       5.1                                        10.1
20.0%                                                       5.5                                        11.0

The first year cost of these increases is approximately half of the full year cost due to the requirement to split this credit across a period of at least two years. These costs are based on the maximum amount of HRI credits available to be claimed in 2016.

The Deputy may wish to note that quarterly and annual HRI statistical reports can be found on Revenue’s website: https://www.revenue.ie/en/corporate/information-about-revenue/statistics/tax-expenditures/index.aspx.