First-time buyers must file tax returns to qualify for rebate

Would-be home buyers hoping to avail of the Government’s new help-to-buy scheme, which enables a tax rebate on the purchase of a new home, will have to file tax returns in order to qualify, it emerged on Wednesday morning – even if they have never done so before.

According to the Revenue Commissioners, applicants who pay their taxes through the PAYE system will need to register with myAccount, the Revenue’s online personal tax portal, and must show that they are fully tax compliant for the years for which they are claiming income tax back.

To do this, they will need to complete an income tax return, Form 12, for each of the relevant four years.

Many PAYE taxpayers will be surprised at this requirement, as typically PAYE workers do not have to file a tax return unless they have additional non-PAYE income or if they are asked to do so by Revenue.

Self-assessed tax payers must be registered with the Revenue’s ROS portal and must have filed a Form 11 for each of the relevant years. Any outstanding taxes will need to be paid before a claim for help-to-buy can be processed, Revenue has said. Note that income tax refers to just that – USC and PRSI paid over the four-year period are not taken into account. Where no income tax has been paid, there is no tax available to refund.

In addition, the tax rebate, which allows first-time buyers to claim back up to 5 per cent of income tax and DIRT paid in the previous four years on a purchase price of up to €400,000, may be subject to a clawback.

Clawback

According to the Revenue, the property must be occupied by the first-time buyer for a period of five years from the date the property is habitable. This could suggest that if you decide to rent out your entire property two years after purchasing it, Revenue will clawback the rebate you received when purchasing.

Further details on the clawback will be published in the Finance Bill on Thursday, October 20th.

A clawback previously applied to first-time buyer exemption on stamp duty – which ran until 2010 – if the property was rented out within five years of purchase, later reduced to two. Under this regime, interest was also charged on the amount that was clawed back.

If a first-time buyer successfully claims a rebate, but it is subsequently deemed invalid for any reason the rebate will need to be refunded. The may be because the first-time buyer was found to have previously purchased a property, or they weren’t tax compliant in the relevant years.

In such an event however, it’s not just the first-time buyer who will be on the hook for it – the developer/contractor and first-time buyer will be “jointly and severally liable” for the refund amount, Revenue has said.

Other points to note include whether or not the rebate will be paid as a lump sum or in stages, similar to the Home Renovation Incentive scheme, which provides for an income tax credit of 13.5 per cent and is payable over two years.

Revenue says that this detail will also be disclosed in next week’s Finance Bill. Given that Minister for Finance Michael Noonan indicated that it would help first-time buyer to raise their deposit to buy a home, one would imagine that the rebate will come in a lump sum and it will need to be a quick process.

Returning emigrants As evidenced in

Wednesday's Irish Times Ask the Experts" Q&A, a major concern among people who returned home from working abroad in recent years is whether or not they will qualify for the scheme.

According to the Revenue, the relief is based on the amount of tax paid over the previous four years – not the average paid in each year.

“So you may be eligible for some contribution to the scheme,” Revenue has said. For example, if you had worked in Ireland in year one and spent years two, three and four abroad, you may still qualify for some relief from the income tax paid in year one.