Removal of TRS for mortgages in arrears.

This morning on Newstalk I went through the changes to TRS (tax relief at source) with Ian Guider on the breakfast show. The link to the interview is here

(skip to 9.15 for the start of the interview)

From the 1 January 2014 Revenue are changing how they calculate what tax relief is due on your mortgage. Up to now the relief was provided on the basis of the tax charged by your lender from now on it will provided on the basis of the tax actually paid. This means that if you miss a mortgage payment you will not benefit from that relief. The follow on to that is that if you make a partial payment you will only be entitled to part of the relief.

There are 350,000 people in the country in receipt of TRS and the bill to Revenue is approximately €350 million per year. With 140,000 mortgage customers in arrears this is obviously going to affect some of these people.

TRS was granted to anybody who took out a mortgage up to the end of 2012, it was abolished after that point. For first time buyers who bought between 2004 and 2008 they got an additional amount of relief which could see a couple with a large enough interest bill benefiting to the tune of €500 per month.

This change is absolutely logical but in my opinion is nonsensical, for several reasons. First this relief will be gone for everybody from 2017 onwards but more importantly from an administrative point of view it will be very difficult to manage. If you miss a month you will loose the relief for that month but if you subsequently make up that month you will then be entitled to the relief again. This will create a short term cash flow benefit for revenue, but the only way I can see them “making” any money out of this change is if they decide any unclaimed relief at the end of 2017 will be lost.

The administration of this change has fallen to the banks so if you have queries relating to it you should contact your lender in the first instance.

Alternatively please feel free to contact me on eoin@prosperous.ie or 045 854716

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