Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

It will certainly cost money. Since there is a cost, we have confined the scheme to two years. It is not open-ended. One must impose a time limit on tax breaks designed to stimulate activity in a given sector. If there is no limit, the stimulation will not happen. There is the potential tax and we have decided to spread the cost over two years. It is for financial reasons that one cannot claim in the year in which the work is carried out. It is also for financial reasons that the tax relief is spread over the two subsequent years. This, of course, helps many low-paid taxpayers. The maximum tax credit is €4,050. Many primary earners would not have a tax liability amounting to that so, by making provision for a two-year period, there is an ease for the taxpayer. If somebody does not have a tax liability sufficient to allow him to claim the credits over the two years, the following year or fourth year may be taken into account. If it takes three or four years before one has a tax liability equal to the maximum relief of €4,050, the reclaims can be spread beyond the second year into the third or fourth year. There is not a big problem with that.

On the issue of extending it to the rental sector, buying houses or apartments for rent is a business. It is not the tenant who would normally upgrade rental accommodation because often he or she would not get the permission of the landlord to upgrade or build onto rental accommodation anyway.

Landlords are already eligible for relief on works carried out to their properties. Where a landlord who builds on another room, turns the garage into an additional bedroom or enhances the property, there is a business relief where that would be written off against the landlord's income. There is a different scheme in place already which benefits landlords.

As for those who do not pay tax, the scheme is designed for taxpayers. It is not designed for persons outside of the tax net. However, there are grants available which can be used by those who do not have a tax liability, particularly from the SEAI, for energy efficiency works. For those undertaking such work as insulating their walls, putting extra insulation in the attic or upgrading the central heating boiler, the Department of Communications, Energy and Natural Resources pays grants rather than allowing a tax credit. That brings in another tranche of persons who are outside the tax net. These grants and the scheme we are discussing can be combined so that a taxpayer can avail, not only of a grant, but a tax credit on a calculation for a residual part of the cost.

The other misunderstanding about it is that the work is confined to work which costs a maximum of €30,000 plus VAT. One can spend as much as one likes on upgrading one's home. It is the tax break that is limited. If one wants to spend €50,000 or €60,000, one should go ahead and do so, but one gets the tax credit only for expenditure up to €30,000 plus VAT.

On the lower end, to qualify the work must be €5,000, inclusive of VAT, which is approximately €4,600 plus VAT, but one can accumulate that over a number of jobs. If one paints the house in February and decides one needs to put in a new kitchen in September, one can combine a number of jobs. The Revenue has not made this complex; it has made it simple. Both the contractor who will be registered for tax and the householder would both register electronically. Because it is registered electronically, one can accumulate jobs with separate contractors and once it passes the value of €5,000 inclusive of VAT, then it qualifies for the tax break in the following year and in the year after. That is the full explanation of it.

There are many amendments that could be made to make this a better scheme. It is just that I cannot afford to do that. It is a cost-control question not to accept some amendments which logically would enhance the scheme further. This will cost a great deal because already there have been many inquiries. It is a scheme that will work.

They introduced a scheme such as this in Sweden in the mid-1990s. It was the first drive to get the economy back and stimulate the building sector. It worked well but it was extremely costly.