Richard Bruton (Dublin North Central, Fine Gael)
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Question 190: To ask the Minister for Finance if his attention has been drawn to the fact that level term assurance policies are not allowable for tax purposes against rental income, whereas standard mortgage protection policies are so allowable; if he has plans to change the legal framework or the conventions used in order that these policies be tax allowable; and if he will make a statement on the matter. [17042/05]

Brian Cowen (Laois-Offaly, Fianna Fail)
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Allowable deductions under the tax law relating to rental income are provided for in section 97(2) of the Taxes Consolidation Act 1997. Section 97(2)(d) authorises a deduction in respect of "the costof . . . management of the premises borne by the person chargeable and relating to and constituting an expense of the transaction or transactions under which the rents or receipts were received, not being an expense of a capital nature".

I am informed by the Revenue Commissioners that in strictness mortgage protection policy premiums are arguably not part of the cost of management of the premises but relate more to the management of the landlord's financial affairs than to the management of the premises. Such expenditure could also be argued to be capital in nature. However, the Revenue Commissioners recognise that financial institutions insist that such policies are put in place when sanctioning borrowings. Accordingly, the Revenue Commissioners, having reviewed the position, decided some time ago to treat mortgage protection policy premiums paid as an allowable deduction in computing rental income for income and corporation tax purposes.

The new treatment was applied in respect of mortgage protection policy premiums paid on or after 1 January 2002. It is confined to mortgage protection policy premiums only. A mortgage protection policy is aimed at covering the full amount left outstanding on a person's mortgage should they die. Such policies are often referred to as decreasing term insurance as the amount that needs to be covered reduces every time a payment is made. Because of the reducing cover required, mortgage protection policy premiums are lower than those of other products offered by life assurance companies. The new Revenue treatment does not extend to premiums payable under these other types of product. It does not, therefore, apply to premiums payable under a level term assurance policy where the amount of cover is fixed from the outset and does not reduce over the term of the mortgage.