Back from Australia but locked out of Help to Buy
Q&A: Dominic Coyle answers your personal finance questions
For the purposes of the Help to Buy scheme, the value of a self-build is the valuation put on the property project by the mortgage lender. Photographer: Jason Alden/Bloomberg
My wife and I returned from Australia in February 2016 after living there for six years. As we were living abroad we haven’t paid any income tax here in Ireland since 2010.
We are planning to build a new house this year and I’m just wondering if we can avail of the Help to Buy scheme in any way? Could we go ahead and build the house this year and apply for the rebate in November/December 2019 before the scheme ends and base it on the income tax we will have paid in 2016, 2017, 2018 and 2019?
Also, do you know how they would assess the value of a self-build house as opposed to a first-time-buyer house? As the first-time buyer would have a sale contract confirming the value but we would only have receipts from the different tradesmen and for building materials, etc.
Mr MD, email
This is one of the oddities of the Help to Buy incentive scheme. Its original purpose was twofold – to increase the supply of homes by encouraging developers to build for the first-time market and, politically even more importantly, to help first-time buyers who effectively felt shut out of the prospect of buying a home due to the more onerous Central Bank mortgage lending rules then in place.
Among this cohort of first-time buyers were young Irish who had gone abroad in the years following the financial crash. The Government was keen to encourage these people home but property prices and the difficulty of getting loans was a key inhibitor.
Unfortunately, however, the Help to Buy scheme as currently constituted expressly excludes many people who have been working abroad in recent years.
The rules state that you are entitled to claim a rebate, or refund, of income tax paid over the four tax years preceding the year in which you buy (or start to build). For couples like you, who have been away for more than four years, that effectively rules you out of the incentive.
If you had gone away for just a couple of years, you could have claimed for at least some of the time but, of course, the reality is that many people left in 2008 and 2009 when austerity suddenly hit and jobs in whole sectors such as construction simply disappeared.
Where does that leave you now? Well, you came home last February so, if you start building this year, you can certainly claim a rebate on any tax paid last year by both of you. But you will not be able to claim back tax paid in 2010 – or indeed anytime before 2013.
The possibility of building this year and claiming later is not open to you. If you buy a newly-built home this year as first-time buyers with a mortgage of not less than 70 per cent of the value of the property, the key date for the Help to Buy incentive is the date on which you sign contracts. If that is this year, the relevant years for claiming a tax rebate are 2013-16.
In your case, where you are looking at self-build, the key date is when you draw down the first tranche of your loan – again assuming you are first-time property owners and that the loan is for at least 70 per cent of the value of the property.
But 70 per cent of what? For the purposes of this scheme, the value of the self-build is the valuation put on the property project by the mortgage lender.
If you are looking to claim over the four years, you will have to wait until 2019 to start drawing down the mortgage and starting your build project, which hardly sounds feasible. However, depending on your tax bills for last year, it could still be worth your while applying to the scheme this year in respect of just your 2016 income tax.
Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to email@example.com. This column is a reader service and is not intended to replace professional advice.