Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

A Leas-Cheann Comhairle, I thank you for the opportunity to raise this issue, which is the revised measure on mortgage interest tax relief that came out of last year's budget. One of the commitments in the programme for Government was to find a way of expanding the mortgage interest tax relief programme to focus on house buyers who bought their homes between 2004 and 2008. This measure was enacted by the Minister for Finance in last year's budget.

A constituents contacted me early in the year to signal that they were encountering difficulty having the measure applied by their bank. I raised the matter in a parliamentary question with the Minister and directly with the Department of Finance. I was given to understand that there may be delays, depending on the bank, in the application of the measure. Later in the year, to my amazement and horror, I was contacted by my constituent again to say they were, once again, having trouble with their bank implementing the measure.

Are we aware that, in some cases, we need banks to implement the measure to ensure people can accrue an advantage from the new policy? Are we aware of the considerable delay by some banks in the implementation of the policy? Does the Department actively track banks to ensure that the measure is being passed on? I was stunned, when I was approached by my constituent for the second time, to find that, many months after the budget, the measure had not yet been passed on to them.

Brian Hayes (Dublin South West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I thank the Deputy for raising this matter. This is a matter for the Revenue Commissioners, who are responsible for the administration of mortgage interest relief through the tax relief at source system.

The Minister for Finance made a commitment in his budget speech of December 2011 concerning a new 30% rate of tax relief on interest paid that would apply to first-time buyers who took out their first mortgage in the period 2004 to 2008. Mortgage lenders provide this tax relief at source to relevant mortgage holders, facilitated by ongoing electronic data file transfers between Revenue and each of the 132 individual qualifying lenders. To apply the new 30% rate, specific technology developments were required to Revenue's computer systems and also to each of the lenders' computer systems. Revenue's systems were upgraded to implement the 30% rate last December and Revenue has since been engaging with the various lenders in regard to their IT enhancements.

Given the short time between the budget and the beginning of the tax year, it was to be expected that the implementation would take some time. However, the Minister was pleased to note that in January last, at the initiative of Revenue, lenders were authorised to grant tax relief at source at an interim rate of 25% to those entitled to the new 30% rate of relief. This was possible because a 25% rate was already a feature of the mortgage interest relief regime and was not dependent on new IT upgrades taking place. In other words, it already existed in the lenders' IT systems. The effect of this initiative was that the 189,011 mortgage holders who were the focus of this Government initiative benefited immediately from at least 25% relief.

The speed of upgrading IT systems has not been uniform across the lenders but, for example, by May, 109 lenders covering 107,664 cases or 57% of beneficiaries had applied the full 30% rate. To date the IT upgrades required to give effect to the 30% rate have been completed by 131 of the 132 lenders, covering 151,466 cases or just over 80% of beneficiaries. These lenders have implemented the increased rate for customers entitled to it, including any arrears. Revenue is in ongoing direct contact with the remaining lender, Ulster Bank, to ensure the additional 5% due to borrowers is paid within the current year as provided for in the regulations governing tax relief at source. While this is not what the Minister for Finance would have wished, the problems which this particular lender had with its IT systems this year are well known and have been described and discussed in the media throughout the year. In the circumstances, it was reassuring that the 25% interim rate was implemented by it. Revenue has advised me that it has received a commitment from the lender that the 30% rate applicable to 2012 will be implemented within the current tax year without requiring any action from mortgage holders.

As regards 2013, unfortunately, Ulster Bank has recently informed Revenue that it will not now be able to fully complete the necessary IT upgrades until March. This is most disappointing. The bank also informed Revenue that it will continue paying beneficiaries at the 25% rate for the months January to March 2013, inclusive, as it did this year, and will implement the 30% rate correctly, including arrears for the first three months, from April onwards. I hope, as I am sure the Deputy does, that this matter will finally be brought to a conclusion.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I thank the Minister of State for the detail in his answer. It is much appreciated. There are, however, two elements in the answer that are disappointing and shocking. The Minister of State made the point that by May, 57% of beneficiaries had obtained access to the full 30% rate. What about the other 43%? Are they either only getting it at 25% or not at all? In the case of the constituent who contacted me, he was not entitled to the 25% rate in the first place and therefore might not have gained in any way. Does that mean the 43% who did not get the 30% were getting nothing or 25%?

The situation with Ulster Bank is also extraordinary. It is only from April of 2013, a full year and a quarter after the budget was implemented, that Ulster Bank customers will get the full 30% rate of mortgage interest tax relief. Given that we implemented the measure due to the financial difficulties faced by these people through no fault of their own, it is shocking to find that by May of this year, 43% of banks had not implemented the full measure, despite the fact the Government had brought in the measure in December. I share the Minister of State's real disappointment about this matter. It is extraordinary that the act of changing a percentage level in an IT system would pose such a difficulty that a bank finds itself unable to implement this measure a full year and a quarter after its introduction in the budget.

Brian Hayes (Dublin South West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

This is a matter of genuine concern. The idea this House, through a financial statement by the Minister for Finance, would provide for additional mortgage interest relief for a group of people who bought at the height of the boom but that it would not be passed on to them because of some IT difficulties is an issue of concern. I spoke to the Minister for Finance about the matter and he will consider the provision of sanctions for lenders where they cannot pass on a decision that would be contained in his financial statement or in the Finance Act. He will consider what sanctions he can bring to bear as a result of this matter.

There are two aspects to this, as the Deputy rightly said. There were those who had not paid by May 2012 but I assume the full amount would be given to the mortgage holders affected, even though they would get it much later in the year. If that is not the case, it is very serious indeed. I also understand Revenue is continuing to work with Ulster Bank, which has had well-publicised IT problems this year. The remaining 20% of outstanding cases are with Ulster Bank, which is a significant mortgage lender. According to the information from Revenue, the first three months of capture next year will be paid by April next year, but that is not good enough. We have made our views known to Revenue, which is engaging with the bank concerned. As I said to the Deputy, if sanctions are applicable, and if further action can be taken by the Minister for Finance, who is concerned about this matter, we will consider that in due course.