Michael McGrath (Cork South Central, Fianna Fail)
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The Help to Buy (“HTB”) incentive, is a scheme to assist first-time purchasers with the deposit they need to buy or build a new house or apartment.

The incentive gives a refund of Income Tax and Deposit Interest Retention Tax (“DIRT”) paid in Ireland over the previous four years, subject to limits outlined in the legislation. Section 477C of the Taxes Consolidation Act outlines the definitions and conditions that apply to the HTB scheme and provides that the amount of relief available shall be the lesser of:

• €30,000,
• 10 per cent of the purchase value of a new home/self-build property; or,
• the amount of Income Tax and DIRT paid in the four years before application for the relief.

One condition of the scheme is that a qualifying first-time purchaser (“FTP”) must take out a loan in an amount equal to at least 70% of the purchase value of the property. In the case of a self-build property, the purchase value is the approved valuation of the self-build property, as approved by the lender in accordance with the Central Bank’s macro prudential rules. These rules stipulate the valuation should include the site value.

The HTB online process includes three stages - application stage, claim stage and verification stage. It is during the first stage, the application stage that a FTP establishes the potential maximum amount of relief due to them, based on the amount of IT and DIRT paid over the previous four years. At application stage, the FTP is asked to confirm that they are eligible for the HTB scheme by declaring, amongst other things, that they are a first-time buyer, that the property will be used as their home and that the loan-to-value ratio of mortgage on the property is 70% or greater. In order to complete the application stage of the process, the taxpayer in question would have confirmed his eligibility, including that he would meet the 70% loan-to-value requirement. However, information regarding the ultimate purchase value of the property and the amount of the mortgage is not provided to Revenue by the FTP until the claim stage, which is the second stage of the online process.

Revenue advise that In this case, when this information was provided at the second stage, it became apparent that the 70% LTV limit was not, in fact, met.

The Revenue guidance on this matter outlines the various criteria for eligibility, including the 70% LTV limit and also outlines how to make a claim:

• Help to Buy – Summary Guide for Applicants, which is available at www.revenue.ie/en/property/documents/htb-summary-applicants.pdf,
• Tax Duty Manual 15-01-46 Help to Buy, available here - www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-15/15-01-46.pdf

The HTB scheme, was initially intended to be limited to persons who had mortgages with a minimum LTV of 80%. However, Central Bank data indicated that a sizeable number of first-time buyers take out a mortgage with a LTV of less than 80%. As such, it was decided to amend the scheme in the subsequent Finance Bill to set the minimum LTV at 70% so as to ensure that first-time buyers did not feel compelled to borrow larger amounts than they would have otherwise in order to qualify for the scheme.

According to Revenue statistics, from the inception of the scheme to end-November 2023 self-builds have represented 25.28% of approved claims. The nature of self-builds is such that an applicant may already own the land on which the house is built which means that they are likely to need to borrow only in relation to construction costs.

Individuals who are in the position of being able to avail of a mortgage at a lower loan-to-value ratio than 70% are considered to have sufficient resources to more than meet the deposit requirements of the macro-prudential rules and thus less in need of assistance from the Exchequer. Lowering the LTV ceiling would therefore only increase dead-weight in the scheme. In fact, the independent review of the scheme which took place in 2022 recommended that the LTV be increased to 80% for purchasers availing of HTB.

It would not be equitable to allow for different eligibility criteria with regard to LTV ratios in respect of self-build properties vis-á-vis that which applies to all other new build homes; the policy position remains that purchasers taking out a mortgage of less than a 70% LTV will not be able to qualify under the HTB incentive.