Revenue clarifies relief cut
The Revenue Commissioners have moved to clarify the qualifying criteria for those who can claim mortgage interest relief after it emerged that thousands of people who bought their homes since 2002 will have their mortgage interest relief cut off from tomorrow.
Up to 230,000 homes will lose their relief until they can show they are entitled to it. This is despite assurances in the recent Budget that homeowners would continue to be able to claim relief for the first seven years of their mortgage.
Speaking this morning on RTÉ's Morning Ireland, Collector General with the Revenue Commissioners Gerry Harrahill said those who had taken out a mortgage on a home in the last seven years will qualify to retain their mortgage interest relief.
"Irrespective of whether you have bought your first house, or it's your second home or you have taken out a mortgage in order to renovate your home or build on an extension, from tomorrow you are only entitled to mortgage interest relief where you are within the first seven years of that particular mortgage," he confirmed.
Mr Harrahill said that holders of mortgages over seven years old will no longer be entitled to mortgage interest relief on that particular loan.
He said Revenue has to review qualifying mortgages based on information that is currently available or will be made available from the lenders.
"We have to decide of the remaining mortgage holders who is entitled to get mortgage interest relief and who isn't. The determinating criteria is - have you got that mortgage within the last seven years? If you have, then you are entitled to mortgage interest relief, if you have a mortgage for longer than seven years then you won't be entitled to mortgage interest relief after tomorrow."
Those who have previously held mortgages but who have taken out new mortgages (in the last seven years) will still be entitled to mortgage interest relief.
Revenue's clarification came after Labour's spokeswoman on finance Joan Burton criticised yesterday's "attempted" clarification as having "only served to muddy the waters further".
She accused the Government of having "botched the execution and communication of the changes."
The move by the Revenue Commissioners means that mortgage-holders on up to 230,000 homes face higher mortgage bills, at least temporarily.
This group includes those who have moved at least once. Among them are 118,000 people who switched mortgage provider in recent years in search of better terms as well as those who have received top-up mortgages. First-time buyers will not be affected.
Those who are expected to see their relief cut off can expect to receive letters from the Revenue in the next fortnight, asking them to provide details of their mortgage and evidence that the money has been used for their main home rather than for other purposes, such as education fees, buying a new car or paying off other debts.
The letters will seek details of when the homeloan was taken out, the loan account number, details of any switch of mortgage provider or any mortgage top-up and the percentage of the loan that was used to “purchase, repair, develop or improve” their main home.
Mortgage-holders who satisfy the Revenue Commissioners that their mortgage relates solely to the purchase of their main residence will have their relief reinstated and backdated.
Fine Gael finance spokesman Richard Bruton last night attacked the Government over the move.
“Yet again, it’s hard-pressed taxpayers who will have to pay for Brian Lenihan’s mistake,” he said. “It was well known that it was going to be much harder to implement changes to income tax midway through the year. Clearly the Minister failed to anticipate any problems and failed to put in place an implementation strategy.”
Minister for Finance Brian Lenihan announced in the emergency Budget earlier this month that, from May 1st, people would only be able to claim mortgage interest relief for the first seven years of their mortgage. Until now, people received mortgage interest relief over the full lifetime of a mortgage on their main home.
The relief is worth up to €900 a year for a working couple who jointly hold the mortgage to their home. First-time buyers can receive relief of up to €5,000 per year for a working couple in the first two years of their mortgage, falling to €4,500 for each of the next three years and then €4,000. The figures are halved for individual buyers.
First-time buyers, whose relief was increased in last October’s budget will not be affected by the move – as long as they have bought their home within the last seven years. A spokesman for the Revenue said its records would indicate which homeowners had received mortgage interest relief for less than seven years and payment to these individuals would not be interrupted.
This accounts for about 220,000 of the 562,000 homeloans in the State, the Revenue says.
It has already determined that mortgages on 57,000 properties around the State will definitely no longer be entitled to the relief from tomorrow. And the owners of as many as 230,000 other homes will also lose their relief – at least until Revenue can be assured that they are entitled to it.
Revenue officials said yesterday that those people entitled to relief would have the backdated sums credited to their accounts once the exercise was completed. It expects to begin issuing letters from May 11th. Homeowners will be able to provide the necessary details on a dedicated website the Revenue will have put in place by that stage or by letter.
A Revenue spokesman last night said it was expected that some people would resume tax relief at source in June but others could face a longer wait.
A spokesman for the Revenue said it had been in discussions with the Irish Banking Federation and has met lenders to see how they could get the information required without writing to individual mortgage holders.
However, in the cases of somewhere between 118,000 and 232,000, Revenue officers believe they will have to issue letters.