Should I demolish current home for new Help-to-Buy relief?

Q&A: Dominic Coyle

New-build grant in budget:  a reader is advised need to wait until the Finance Bill to see if they would be allowed knock down a perfectly serviceable home in order to avail of new-build status. Such action certainly goes against the spirit of the measure and may yet go against the strict wording. Photograph: Chris Ratcliffe/Bloomberg

New-build grant in budget: a reader is advised need to wait until the Finance Bill to see if they would be allowed knock down a perfectly serviceable home in order to avail of new-build status. Such action certainly goes against the spirit of the measure and may yet go against the strict wording. Photograph: Chris Ratcliffe/Bloomberg

 

I have a query in relation to the new 5 per cent rebate. As I understand it, the rebate does apply to self-builds but it would not apply to renovating a property.

My partner and I will be first-time buyers. We are living in his deceased parents’ house and had planned to renovate it. If we instead knocked the existing house and started building from scratch, would we then qualify for the rebate?

Ms NF, email

Let’s back up a little here. Knocking down a home for a bit of tax relief is a pretty dramatic move.

The rebate you refer to is the money available under the new Help-to-Buy initiative unveiled by Minister for Finance Michael Noonan in his budget last week.

As you say, the assistance amounts to 5 per cent of the purchase price of the house, though there is an upper limit of €20,000 – effectively 5 per cent of €400,000. You are allowed to purchase a property for as much as €600,000 – at least, you can unless the Opposition forces a change to a lower figure in the Finance Bill due later this month and which enacts the measures announced in the budget – but the maximum rebate is still €20,000.

I mention rebate there and this is where the money is coming from. Essentially you will be able to apply for a rebate of income tax and Dirt paid over the four years prior to purchasing up to the maximum of €20,000 or 5 per cent of the home value, whichever is the lower.

The basic terms are that you must be a first-time buyer, the home itself must be a new build, you must file tax returns (Form 12 for PAYE workers) for the four years over which you are claiming the rebate and you must live in the property as an owner-occupier for at least five years – ie you cannot buy and just rent it out.

As you say, there is nothing to stop you self-building in order to avail of the rebate, so thus far, you’re fine.

Sledgehammer solution

First, we need to wait until the Finance Bill to see if you would be allowed knock down a perfectly serviceable home in order to avail of new-build status. It certainly goes against the spirit of the measure and may yet go against the strict wording when we see it.

Second, even if you could avail of it, you need to weigh the cost of knocking down the existing property and rebuilding simply to get a €20,000 rebate against the merits of staying as you are (as you had originally planned) and just using the Home Renovation Incentive to give the place a facelift. It strikes me you could well be worse-off.

However, the most critical issue is whether or not you are first-time buyers at all. While neither of you has bought a home, I assume from your letter that your husband has inherited his former parents’ house. On that basis, he is a property owner and not a first-time buyer and, as his wife/partner, the same applies to you. The fact that you have not actually bought a home is irrelevant.

You could find yourself standing amid the rubble of your current home only to find yourself with no home and no eligibility to this magic €20,000.

I’d think again if I were you.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to dcoyle@irishtimes,com. This column is a reader service and is not intended to replace professional advice.

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