At present, if you buy a home using the Help to Buy scheme, you cannot then rent it out and earn rental income, or else there is clawback by Revenue of the Help to Buy sum. For individuals looking to move abroad for work and who already own a home which was purchased using the Help to Buy scheme, will Revenue seek repayment?
How can one avail of an exemption to avoid clawback (if any)? Many first-time buyers become accidental landlords in purchasing a home but moving due to existing work or changing jobs entirely.
Ms K.S.
Help to Buy is a pretty generous incentive designed to help first-time buyers who wish to buy a home get on the housing ladder. It was also intended, when launched, to encourage developers to build homes for the first-time buyer market.
Depressingly, the housing crisis is not new and even back then, in 2017, there were significant issues with the supply of homes.
In the intervening years, Help to Buy has been adjusted to make it even more generous.
As of now, an aspiring homeowner can claim back income tax and deposit interest retention tax that they have paid in Ireland over the four full tax years before the year in which they are making the application up to a maximum of €30,000 or 10 per cent of the price of the new property or the approved valuation in the case of one off homes you are building yourselves – whichever is the lesser.
Given the price of new homes, for most people, it is likely that the €30,000 figure is the relevant one.
There is much discussion about whether it has really helped first-time buyers or simply boosted the price developers can secure for the new homes they build. Certainly, new homes tend to go for a premium over second-hand properties.
There are other criteria. Unsurprisingly, you must be tax compliant in any year for which you are seeking a tax refund. The property itself needs to be valued at €500,000 or less, you need to have taken out a mortgage for at least 70 per cent of the price and you must be a first-time buyer.
Finally, the first-time buyer must occupy the property as their main home for the first five years of ownership. Otherwise, as you say, there is a clawback.
This is hardly surprising as the scheme was intended specifically to boost home ownership, not the buy-to-let market. There is no capacity to rent the property out in those first five years, although you can avail of the Rent-a-Room scheme that allows you earn up to €14,000 in a tax year by letting a room or rooms out in your main home.
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The clawback is on a sliding scale. If you vacate the house or apartment in the first year of ownership, you must repay everything the Revenue allowed you in the tax refund. That drops to 80 per cent if it happens in year two, 60 per cent in year three, 40 per cent in year four and 20 per cent in year five.
Finding even €12,000 in year four if you need to move out of the home for any reason would be a significant challenge for most first-time buyers. Finances tend to be squeaky tight in those early years of home ownership.
You have three months to pay the money back once the property stops being your main family home. And how does Revenue find out? You are obliged to tell them.
You’ll probably find you are also obliged to inform your lender, too, as it will likely affect the terms of your mortgage.
But are there exemptions, you ask? Well, yes, but they are fairly limited.
You mention someone who might be moving abroad for work, or who move somewhere else in the State either due to the requirements of their existing jobs or because they change jobs.
Revenue does allow an exemption from clawback if you are required to relocate due to your current employment, but your employer will be required to provide evidence to the tax authorities. They won’t just take it on trust or your say-so.
And you will be expected to return to the property bought under Help to Buy when the necessary relocation concludes and to see out your five-year term of occupation. Understandably, you need to make sure you don’t buy again wherever you are relocated.
That aside, no, there are no exemptions. You cannot just choose to move jobs to another part of the State, and you cannot decide that you want to take a couple of years out to head down to Australia or whatever.
In planning your career path, the five-year commitment you make under Help to Buy is just one of many factors you need to consider. Once the five years are up, of course, you are free to do what you want with the property.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com with a contact phone number. This column is a reader service and is not intended to replace professional advice
