244A Application of section 244 (relief for interest paid on certain home loans)

Summary

This section, which applies from 1 January, 2002, introduced tax relief at source (TRS) for mortgage interest relief – that is, the tax relief in respect of interest paid on a loan used for the purchase, repair, development or improvement of a person’s sole or main residence. From the commencement of TRS, that relief is no longer given through the tax system but, instead, is given “at source” when the borrower makes a mortgage repayment to the mortgage lender. The qualifying interest portion of the repayment is reduced by a percentage equal to the standard rate of income tax – thereby giving relief to the borrower. The mortgage lender is, in turn, reimbursed with an amount equivalent to that reduction by the Revenue Commissioners.

There is no change in the basic qualifying conditions for mortgage interest relief as a result of the TRS arrangements. A “qualifying residence” continues to be one which is the sole or main residence of the individual claimant, or his/her former or separated spouse, or his/her dependent relative but it has to be located in the State. (Relief for qualifying interest paid in respect of a loan on a sole or main residence in Northern Ireland or Great Britain continues to be given, but outside of TRS). The upper limits to the interest qualifying for relief – which (see section 244) depend on the claimant’s marital status and whether or not he/she is a first-time buyer – apply under TRS.

Qualifying loans are loans which are used solely for the purchase, repair, development or improvement of a qualifying residence but such loans within TRS are those which are secured on the residence, that is, mortgage loans. Interest on qualifying loans which are not mortgage loans continue to attract tax relief but this is given through the tax system and not through TRS.

TRS extends relief to persons with qualifying loans but who previously did not get relief as their taxable income was insufficient to avail of the relief.

An officer of the Revenue Commissioners may request in writing a “qualifying lender” to provide such information in relation to qualifying loans as is reasonably necessary to determine the relief due to an individual for interest paid on certain home loans and the “qualifying lender” is obliged to provide the Revenue Commissioners with the information requested.

Details

Definitions

(1)(a) The most important terms defined are—

“qualifying dwelling” which makes it clear that the residence in respect of which the mortgage interest is paid must be situated in the State;

“qualifying mortgage loan” specifies that the loan in question must be secured on a qualifying dwelling i.e. a mortgage loan.

Purpose of section

(1)(b) The intention of the section is stated, that is, that tax relief for certain interest (due under section 244) is, in certain circumstances, to be given by way of deduction at source and in no other manner.

TRS

(2)(a) Individuals paying qualifying mortgage interest for which relief is due under section 244 are entitled, in accordance with regulations, to deduct and retain a percentage equal to the standard rate of income tax for the year of assessment in which the payment is due.

(2)(b) A mortgage lender to which the net payment is made is obliged to accept, in accordance with regulations, that payment as discharging the individual’s full liability in respect of mortgage interest, and the mortgage lender may recover from Revenue the equivalent of the amount withheld by the borrower.

Qualifying lenders

(3) The bodies which are qualifying lenders are listed. These comprise banks, building societies, local authorities, mortgage lenders in the EEA corresponding to banks and building societies which lend on the security of property based in the State, and other bodies which apply to Revenue to be registered as qualifying lenders, and which Revenue are satisfied should be registered.

Revenue are required to maintain and publish a list of qualifying lenders. They register applicants they regard as being entitled to be registered as qualifying lenders and may also cancel a body’s registration. A body may appeal against Revenue’s refusal to register it or against cancellation of its registration.

Administration of TRS

(5) The Revenue Commissioners are to make regulations in respect of the administration of the TRS system for mortgage interest relief. Every such regulation must be laid before Dáil Éireann. Regulations have been so made by the Revenue Commissioners – see the Mortgage Interest (Relief at Source) Regulations 2001, S.I. No. 558 of 2001.

(6) Amounts of refunds to mortgage lenders to which they are not entitled are to be repaid by the mortgage lender.

Data

(7)(a) An officer of the Revenue Commissioners may request in writing a “qualifying lender” to provide such information in relation to qualifying loans as is reasonably necessary to determine the relief due to an individual for interest paid on certain home loans.

(7)(b) The “qualifying lender” is obliged to provide the Revenue Commissioners with the information requested not later than 30 days (or longer period agreed with an officer of the Revenue Commissioners) after receiving the request for the information.

(7)(c) The Revenue Commissioners may not use the information provided for any reason other than to determine the correct relief due to an individual.

Relevant Date: Finance Act 2019