Dáil Éireann debate -
Thursday, 29 Nov 2001

Vol. 545 No. 3

Written Answers. - Tax Reliefs.

Brian Hayes

Question:

104 Mr. B. Hayes asked the Minister for Finance if persons who obtained a shared ownership loan from their local authority are entitled to receive mortgage interest relief through taxation; and if he will make a statement on the matter. [30225/01]

Minister for Agriculture, Food and Rural Development (Mr. Walsh)

Under the provisions of section 244 Taxes Consolidation Act, 1997, an individual is entitled to income tax relief on mortgage interest paid on loans used for the purchase, repair, development or improvement of his or her sole or main residence or of the sole or the sole or main residence of a former or separated spouse or of a dependent relative. The residence must be situated in the State, Northern Ireland or Great Britain.

The maximum amounts allowable for the current short tax "year" 2001 and corresponding amounts for a full year are set out in the chart below – the relief is available at the standard rate of tax:

Maximum Mortgage Interest Relief at Standard Rate of Tax	Short Tax “Year” 2001Maximum	Full YearMaximum
First Mortgage (first five years)SingleWidowed-MarriedOthersSingleWidowed-Married	£1,850 (2,349)£3,700 (4,698)£1,480 (1,879)£2,960 (3,758)	£2,500 (3,175)£5,000 (6,350)£2,000 (2,540)£4,000 (5,080)

Shared ownership loans from a local authority are treated no differently than any other loan in that, subject to the conditions and limits outlined above, an individual is entitled to claim income tax relief on any mortgage interest paid on such loans. I understand that under a shared ownership arrangement, an individual's monthly repayment comprises rent payable to the local authority and repayments of capital borrowed from the local authority together with mortgage interest thereon. While income tax relief is available in respect of the mortgage interest paid, there is no income tax relief due on the rental element of the monthly repayment.

From 1 January 2002 income tax relief for mortgage interest will be given at source by the relevant lending agency – local authority, building society or bank – under the tax relief at source system. The relief will be built into the borrower's monthly mortgage repayments. In the case of shared ownership loans from local authorities, the borrower will receive full details directly from the local authority on how tax relief at source will be applied to his or her home loan.

Brian Hayes

Question:

105 Mr. B. Hayes asked the Minister for Finance if mortgage interest relief, which was previously deducted at source, will now be deducted by mortgage lenders for individual tax payers; the reasoning behind this radical shift in policy; if mortgage lending companies will not act on behalf of the Revenue Commissioners; if such lending institution will obtain fees from the Revenue Commissioners in relation to the operation of this new scheme; his views on whether there is a potential breach of privacy in respect of individual mortgage lenders and their respective company; and if he will make a statement on the matter. [30226/01]

Minister for Finance (Mr

.McCreevy): The issue raised by the Deputy relates to the new scheme of administering tax relief in respect of qualifying mortgage interest – tax relief at source. The Deputy should be aware that this policy change was in fact announced in last year's budget. The essence of this scheme is that from 1 January next, tax relief on qualifying mortgage interest will no longer be administered through the tax system but will instead be given at source by the mortgage lenders. This means that the tax relief element will be given to the borrower at the time the payment is made to the mortgage lender and will result in a lower mortgage payment at source.

The change to tax relief at source was made with a view to putting in place a much simpler and more efficient method of administering tax relief on mortgage interest. Any adjustment in interest rates as well as any change in the amount of interest payable as the mortgage matures will be immediately reflected in the amount of tax relief given. In addition it will also extend for the first time tax relief on mortgage interest to those whose income is too low to avail of the relief under the current system.

While the lending institutions will administer tax relief on mortgage interest from 1 January, 2002, there are no plans for the Revenue Commissioners to pay fees to the institutions in relation to the operation of the scheme.

The Finance Act 2001, section 23(5)(f2>a)(iv), makes provision for the transmission by the Revenue Commissioners of certain information to the lenders, that is necessary for the operation of the scheme. I am satisfied that the provision of this information is not in breach of privacy.