The Revenue Commissioners have recently highlighted an issue connected to the Help To Buy (HTP) Scheme and Equity Finance.
In a circular sent to solicitors, they have asked the first time purchasers are reminded of the following:-
- HTB applicants should not include equity finance as a qualifying loan in their HTB claim.
- The equity finance should not be included in the Loan to Value (LTV) calculation.
One of the conditions of the HTB scheme is that the applicant must have a loan to value ratio of at least 70% and it is important to remember that any equity finance cannot form part of how this figure is arrived at.
The Revenue has highlighted a number of sections of tax legislation to explain the above.
Section 477C of the Taxes Consolidation Act 1997 provides the following definitions which are of relevance for the HTB scheme:-
- “Loan-to-value ratio” – the amount of the qualifying loan as a proportion of the purchase value of the qualifying residence or the self-build qualifying residence.
- “Loan” – any loan or advance, or any other arrangement whatever, by virtue of which interest is paid or payable.
- “Qualifying loan” – a loan, which is used by the first-time purchaser wholly and exclusively for the purpose of defraying money employed in the purchase of a qualifying residence or the provision of a self-build qualifying residence (including, in a case where such acquisition is required for its construction, the acquisition of land on which the residence is constructed). The loan must be one which is entered into solely between a first-time purchaser and a qualifying lender (but this does not exclude a loan to which a guarantor is a party). To qualify, the loan must be secured by the mortgage of a freehold or leasehold estate or interest in, or a charge on, a qualifying residence or a self-build qualifying residence.
The Revenue have also confirmed that the loan-to-value ratio cannot be less than 70%. This is also set out by legislation and it is a mandatory requirement of the Scheme.
If you would like more information on the HTB Scheme, or have general queries on the procedure for buying a house in Ireland, and the government schemes that are available to help you, then feel free to complete the form below and we will get in contact with you.