We are looking to buy our first home together. The house we are looking at was a new build one year ago, and the people who bought it then availed of Help to Buy. Because they aren’t staying in the house for the required five years, they need to return the grant they received.
We have been approved for Help to Buy. Given the vendors are returning their grant, should we be able to avail of same?
Ms PG
Help to Buy has been a great assistance to aspiring young homebuyers at an individual level, even if the jury is out on the extent to which it has delivered on its stated aim of helping people to buy their first homes and incentivising developers to build for that market.
When you’re scrambling around to make the numbers stack up on home purchase, you don’t tend to worry too much about such big-picture policy issues. It’s all about making the most of what you have, and Help to Buy has delivered on that basis.
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It has been amended a few times since it was first introduced. As of now, it allows first-time buyers to claim back income tax and (less relevant) deposit interest retention tax (Dirt) that they have paid on their savings over the four years prior to the year in which you are buying the home.
You can claim back up to a maximum of €30,000 or 10 per cent of the price of the new property, whichever is the lesser.
Even if it had been a long-abandoned home that you bought and restored, you would not be considered eligible for Help to Buy
There are other conditions too: 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, obviously, you must be a first-time buyer.
The relief can provide the 10 per cent deposit most first-time buyers will be required to put up themselves or, better still, reduce your mortgage borrowings and so the scale of your monthly repayments.
However, there are some very strict rules in place under the scheme – relating both to what properties qualify and how you need to behave once you have availed of the relief.
Looking at those in reverse, the key post-relief caveat is that anyone availing of Help-to-Buy must live in the property for at least five years. Fail to do that and, as the owners of this house you are interested in have discovered, you will have to repay some of the relief.
There are very limited exceptions, mostly revolving around being forced to move for your work.
The clawback reduces over time. So if you fail to live there for a full year, you need to repay all of it. That figure falls to 80 per cent in year two, 60 per cent in year three etc.
But that is the sellers’ problem; you’re understandably more interested in your perspective. And that will relate to the type of property eligible for the scheme.
The watchword here is “new”. With very limited exceptions, the property must be newly built – either for you as a one-off or as part of a housing estate.
Under the heading, What is a Qualifying Residence?, Revenue’s Tax and Duty Manual among other things states clearly: “The property must not previously, at any time, have been used, or suitable for use, as a dwelling.”
The key post-relief caveat is that anyone availing of Help-to-Buy must live in the property for at least five years
That is pretty black and white. Even if it had been a long-abandoned home that you bought and restored, you would not be considered eligible for Help to Buy.
So what about those very limited exceptions?
One covers properties that were originally non-residential, but which have since been converted for residential use. The other relates to derelict properties that you demolish and then rebuild on the same site - but even then, Revenue says only that they will consider such applications on a case-by-case basis.
This property was previously used as a dwelling, however briefly. And so it will not be available to you under Help to Buy.
The fact that they are repaying the bulk of their Help to Buy relief does not open the door for you to step into that Help to Buy status, as it were – even if you were to seek only a portion of the relief to account for their period of occupation.
When you’re scrambling around to make the numbers stack up on home purchase, you don’t tend to worry too much about big-picture policy issues
Where does that leave you? With two choices, really. Either you can weigh up whether this property is affordable for you without the relief granted under Help to Buy, or you can regretfully move on and see if you can find another home in the area that does meet the eligibility criteria.
Can the Help to Buy rules change? Of course they can, and have done in the past – though that related mostly to how much you could claim in relief, not a fundamental reassessment of the qualifying criteria.
There was (unsurprisingly) a campaign from the construction sector to include second-hand homes, such as this house, under the scheme. But it was pretty half-hearted, as though even the builders knew it was a reach too far.
There is an arguable grey area for those very few homes where the original owner had the relief clawed back, as in your case, but I detect no sign of the Government relenting even on that.
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
