Michael McGrath (Cork South Central, Fianna Fail)
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73. To ask the Minister for Finance if the Revenue Commissioners has changed the basis on which it pays mortgage interest relief from one paid on interest payable by the customer to one based on interest paid; and if he will make a statement on the matter. [52420/13]

Michael Noonan (Limerick City, Fine Gael)
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The Statutory position in relation to mortgage interest relief entitlement is that individuals can avail of the relief in respect of qualifying interest paid in a tax year, as provided for in Section 244 of the Taxes Consolidation Act 1997. Since the introduction of Tax Relief at Source (TRS) in respect of mortgage interest payments in 2002, ‘interest charged’ and ‘interest paid’ figures generally reconciled in the vast majority of cases over any 12 month period. In such circumstances, Revenue agreed with lenders to allow the relief on the basis of both ‘interest charged’ and ‘interest paid’ for ease of administration. A key part of the agreement required the lenders to inform Revenue of the exceptional cases where cumulative arrears had built up over an 18 month period. All such cases were reviewed on a case by case basis and the relief was withdrawn where appropriate. The 18 month ‘review period’ was reduced to 6 months in September 2012 in response to the increasing numbers of mortgage arrears cases.

As the number of arrears cases being reported by the lenders continued to increase, Revenue further reviewed the practice of allowing the relief on both ‘interest charged’ and ‘interest paid’ and on the basis of the review, has instructed all lenders to only allow TRS in line with the requirements of the legislation with effect from 1 January 2014, i.e. interest paid by the borrower.

The new arrangements will have no impact for borrowers who pay the correct mortgage amount on time, in accordance with the terms of their loan. In instances where borrowers do not make payments or pay less than the amount of interest due, then the TRS amount will be reduced to reflect the actual amount paid.