The Help to Buy Incentive (“the Scheme”) was introduced in October 2016 as part of the Finance Act, 2016 to assist first time buyers in pulling together their deposit to purchase or build a new house or apartment. It works by allowing eligible parties to claim a refund of income tax or DIRT paid over the previous four tax years and to use this refund as a contract deposit for the purchase of a new home.
How much of a refund is available under the Scheme?
- The relief available amounts to a maximum of 5% of the purchase price of a new house or apartment or 5% of the completion value of a self-build.
- USC and PRSI are not considered for the purpose of the Scheme
- The purchase price or completion price of a new property is capped at €400,000.00, meaning the maximum relief that can be claimed is €20,000.00, even where more than one person claims the relief.
- In relation to joint or multiple claims, all the parties must be first-time buyers to avail of the relief.
Who is eligible to apply under the Scheme?
- Only first-time buyers are entitled to apply – this means the applicant cannot have either directly or indirectly purchased or built a property previously.
- The Scheme also does not apply to investors or ‘cash’ purchasers
- The Scheme does not apply to those wishing to extend existing properties.
- Pursuant to the revised Central Bank rules, first-time buyers can borrow up to 90% of the value of the property, meaning most first-time buyers will need a deposit of 5% if they are eligible for the Scheme.
- A mortgage must be taken out by the first-time buyer, of at least 70% of the value of the property, for them to be considered eligible under the Scheme as the purpose of the scheme is to assist those struggling to meet the requisite deposit to apply for a mortgage. This means that cash buyers are excluded from the Scheme
- The first-time buyer must occupy the Property for five years from the date it is habitable or there will be a clawback on the relief, which is calculated on a pro-rata basis.
- The Scheme was backdated and it applies to contracts signed on or after 19 July 2016 and up until 31 December 2019.
How does a developer get involved under the Scheme?
- Developers wishing to operate the Scheme must first apply to Revenue to become registered as a ‘qualifying contractor’.
- Revenue will need to be satisfied as to the developer’s evidence of tax compliance
- The developer must provide details of the qualifying residences which the will be offered for sale within the period that the Scheme is in operation including details of planning permission and the title to the property.
- Clawback provisions also apply to developers in circumstances where the purchase of a property is not completed.
How does the Scheme work?
Those who qualify for the Scheme will receive the rebate in the form of a repayment of income tax or DIRT paid and the rebate will be paid directly to the contractor as part of the purchaser’s contract deposit.