First-time homebuyers are to be given a refund on income tax to help them accumulate a mortgage deposit under proposals expected to be included in next month’s Budget.

It is understood the level of the refund, which sources expect to range between €5,000 and €15,000, will be linked to the price of the home rather than the earnings of buyers.

The scheme will be designed to ensure couples and single people are treated equally.

The grant will be awarded as a "bullet refund", a lump sum discharged in one go, to help buyers meet the Central Bank requirements in relation to mortgage deposits.

The Central Bank rules require first-time buyers to have a deposit of 10 per cent of the first €220,000 of the price of a home and 20 per cent of the remainder.

There will be an upper limit on the price of a property qualifying for the new scheme.

The exact details are still being finalised by Minister for Finance Michael Noonan, but the cap is expected to be in the region of €350,000-€380,000.

However, final figures will not be arrived at until Mr Noonan’s overall tax package is agreed in advance of the October 11th Budget.

Proof of purchase will be required to access the scheme.

Sources pointed out that the Revenue Commissioners are involved in the process of a house sale, such as the payment of stamp duty.

“The sale of a home is a document-heavy process,” one person familiar with the proposal said.

Encourage developers

The scheme is aimed primarily at newly-built properties priced between €220,000 and €320,000.

It is being pitched as a way of helping potential buyers to accumulate a mortgage deposit and also to encourage developers to build new homes.

Ministers expect the scheme to be approved by the Central Bank as a way of enabling buyers to put together a deposit.

Mr Noonan has already informed senior bank officials of his plan.

The proposal is understood to be based on an existing scheme that refunds income tax to entrepreneurs hoping to establish their own businesses.

In that scheme, the refund is granted on the condition that income tax has been paid in previous years and the cash refund will be invested in the new company.

Although Fianna Fáil housing spokesman Barry Cowen has called for any new scheme for first-time buyers to include second-hand homes, Government sources are adamant it will focus solely on new builds.

New homes only

It is understood Minister for Housing

Simon Coveney

and Mr Noonan spoke to each other yesterday to reaffirm that the scheme will apply to the purchase of new homes only.

The Independent Alliance this week met Mr Noonan and Minister for Public Expenditure Paschal Donohoe and suggested the first-time buyers' scheme could be based on a partial refund of the VAT paid on the home.

Some Independent Alliance figures had proposed the idea of the VAT being refunded to the homebuyer over a three-year period.

It is understood, however, that refunding VAT is seen by Ministers and officials as potentially too complicated.

Earlier this week, Mr Coveney indicated couples and individuals seeking to buy new homes will be treated equally.

“I can assure you this is about helping a couple or an individual to put a mortgage and put a deposit together,” he said.

“We are not doubling up for a couple versus an individual. That is not the way it will work.”