Mortgage Interest Relief (TRS) changes for May 2009

The changes mentioned in the recent budget will be kicking in soon and it will mean that people are likely to be affected in their mortgage interest relief for the month of May. TRS (tax relief at source) is going to be temporarily suspended for most of qualifying borrowers so that revenue can work through the claimants and determine who should be obtaining the benefit and at what level.

The rules regarding TRS can be found on the Revenue Commissioners website, some of the national commentary on it appeared in the Times (here).

According to banking sources we spoke to the borrowers who will be affected are any who changed their mortgage in the first seven years, so if you switched to get a better deal, topped up or made any changes you will probably be affected in the short term. As well as that, any first time buyers who moved during this time will be affected, if you bought a house (for instance) in 2004 then moved in 2006 then you are still (for TRS purposes) considered a first time buyer until 2011, the relief is connected to your status from the time you first take out a mortgage, not to the property in question.

The time it will take to resolve will be at some point in June according to the Revenue Commissioner.

Below are answers to some of the questions you might have about the change in TRS. The come compliments of Barry Delaney of Haven Mortgages who were the first bank to contact industry about this issue, we are both thankful and impressed, I think we speak for customers and intermediaries alike when we say this customer driven approach of Haven pointing out a problem before it arises is particularly welcome in banking.

Important Update on Tax Relief at Source (TRS) – FAQ

What is happening?
From 1st May the Revenue are making changes to the Tax Relief at Source (TRS) system.  As a result of changes announced in the Government’s April 2009 Emergency Budget, borrowers who qualify for TRS will now be entitled to receive relief for the first seven years of their mortgage only, .

First-time buyers, who have not moved house/remortgaged/re-financed, will continue to receive tax relief at source in the usual way.

All borrowers currently receiving TRS are having their relief suspended immediately, pending a review of their entitlements by the Revenue under the amended TRS scheme. Mortgage lenders are acting on the instructions of the Revenue in this regard.

Why is this happening?

The Revenue want to ensure that customers get relief only for the period they are entitled to receive it.
For example, a borrower (including first-time buyers) who switch/change their mortgage lender three years into their mortgage will not be classified initially as a qualifying borrower.  However, under the amended TRS scheme they will be entitled to a further 4 years relief under the seven year rule.

These changes will ensure that customers, as in the example above, are accurately assessed for the remaining relief owed and are not awarded an additional seven years tax relief when switching.

Will customers who still qualify for TRS get reinstated?

Yes.  The Revenue have committed to a full review of these accounts across all institutions and will reinstate TRS for customers who continue to qualify under the new rules.

How long will this review take?
An exact timeline has not been provided at this stage, however the Revenue aspire to have the review completed during the month of May 09 and to begin reinstatement of payment/credit for TRS from June 09 onwards.

This timeframe is purely indicative at this stage and given the number of accounts involved across all institutions this review may take longer to complete.

Will qualifying customers get back the TRS they miss while the review is ongoing?
Yes.  The Revenue have agreed to reimburse customers for any relief entitlements not paid/credited during the review.

It is important to note that under the new TRS rules included in the recent budget, borrowers may now attract a lower level of relief than previously enjoyed and may not get back as much as they anticipate or as much as previously received.

Are the Revenue telling customers what is going on?
No plans are currently in place for communication by the Revenue to the general public.

As you will appreciate this will cause a great deal of confusion for borrowers who will be unsure as to why their relief has been suspended.

We expect a large volume of calls to both brokers and Haven on this issue and it will be important to reassure borrowers that this is a temporary measure.

HOWEVER, AFFECTED BORROWERS CAN EXPECT HIGHER DIRECT DEBITS TO THEIR ACCOUNTS FOR THEIR MONTHLY MORTGAGE PAYMENT, DUE TO THE ABSENCE OF TAX RELIEF BEING CREDITED TO THEIR MORTGAGE ACCOUNTS.

Customers who are currently experiencing financial difficulties as a result of the economic downturn could be negatively affected by this change and it will be important to handle such queries in a manner sensitive to their circumstances.

if you have specific questions in relation to tax relief at source you can call the Revenue TRS helpline on 1890 463626.

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