The legislation governing mortgage interest relief is contained in Section 244 Taxes Consolidation Act 1997, as amended. “Qualifying interest” for the purpose of entitlement to mortgage interest relief is defined in that section as “the amount of interest paid by the individual in the year of assessment in respect of a qualifying loan”.
The effect of this provision is that only interest paid in a tax year, relating to the current or previous tax year, is eligible for mortgage interest relief, subject to the ceiling (maximum amount of interest allowed) applicable in the year the interest payment is made. In instances where a borrower pays less than the amount of interest due, then the relief is reduced to reflect the actual amount of interest paid. Where no interest payments are made, no relief is allowed. If the borrower pays the arrears in a later year, then the appropriate mortgage interest relief will be paid in the year in which the payment is made, subject to the ceiling applicable for that year.
Mortgage interest relief is administered through the Tax Relief at Source (TRS) system. Revenue issues detailed instructions to each lending institution setting out the criteria to be used in calculating the correct amount of mortgage interest relief applicable to the various qualifying loans. The lending institutions then apply the criteria to interest payments received from borrowers to calculate the correct amount of relief.
Revenue does not have any authority to instruct mortgage providers on how payments received from borrowers should be allocated to the borrower’s account, and any disputes in this regard are a matter for both parties to resolve. Revenue’s only role is to ensure the TRS system is properly administered, based on the information provided, and that payments claimed through the system are made on a timely basis.
Revenue carries out compliance checks on the various mortgage providers to ensure the correct operation of the mortgage interest relief scheme. As part of the compliance process, each main lender is required to submit a monthly electronic file to Revenue setting out the amount of qualifying interest paid by each borrower and the amount of mortgage interest relief allowed in respect of each qualifying loan in the previous month. Smaller lenders and local authorities are required to submit annual files setting out similar information. Each month, Revenue cross-checks the information provided by the lenders against its own database and any discrepancies are immediately followed up with the lender.
The most recent compliance checks to be completed related to March 2019, during which 261,299 TRS accounts were reviewed. Following the review 2,460 queries were raised with the various lenders, of which only 14 remain to be resolved.
Under Section 244A of the Taxes Consolidation Act 1997, Revenue can request a lender to provide information in relation to any qualifying mortgage loan to verify that the correct relief was applied, and the lender must comply with the request within 30 days. On the rare occasion where a shortfall is identified, Revenue will pay the amount due directly to the borrower.
On receipt of any complaints or queries from mortgage holders or their representatives, Revenue will always follow up with the lending institution to ensure issues are investigated and resolved without delay.
I am also advised by the Central Bank of Ireland that if a regulated entity has applied charges or reliefs to consumers in arrears (whether that be through a misapplication of tax relief or any other relevant charge) in a way that results in arrears figures being incorrect or overstated, the Central Bank of Ireland expects that, as an error, it is rectified speedily and accurately and in line with the provisions of the Consumer Protection Code, 2012 (the Code). In particular, section 10 of the Code makes specific provision for resolving consumer complaints.