Hi,
I am one of the AIB 5,900 group who received a loan write down and cheque in settlement of the AIB tracker issue. My loans were Buy to Let loans. I have been curious as to what tax issues could arise re these settlements. I am aware that in the booklet that was with the letter from AIB covering the settlement, there is a paragraph stating that AIB will look after any taxes should they arise. That to me was comforting but it did leave me wondering how could AIB know what personal tax situation.
I did a bit of digging re this issue and found a Revenue Commissioners statement which I have copied in bold below. This to me gives more comfort as it says the lender is responsible for any tax. However, I want to be 100% sure. The big issue to me is that I have claimed substantial tax reductions on loan interest that ultimately AIB has refunded. So, have I potentially over claimed the tax relief. Has anyone any experience and/or knowledge re this? To be clear, I think I have enough clarification to adopt the position of no tax adjustments are necessary, but I would appreciate comments re specific Revenue or tax advisor experience. Many thanks.
Tax and Duty Manual Part 04-08-19
1
Income tax implications for landlords with buy-to-let
mortgages who receive tracker mortgage redress
payments from lenders
Part 04-08-19
Document last updated August 2019
____________________________________________________________
Tax and Duty Manual Part 04-08-19
2
The Central Bank has published Guidance: Principles for Lenders when Tracker
Mortgage Related Issues Identified for Redress. At Appendix B of Appendix 3,
“Supplementary Guidance for Redress and Compensation for Tracker Mortgagerelated
Issues”, Paragraph 1.3.4., on page 8, this document states:
Any tax liability that impacted customers may incur as a result of the relevant
issue or in respect of any redress, compensation or other payment made to
impacted customers by the lender, as a result of the relevant issue, are to be
discharged by the lender. The lender is to liaise directly with Revenue in this
regard.
As the lenders are required to discharge any tax liabilities on behalf of the customers
and liaise directly with Revenue, taxpayers who receive compensation under the
“Tracker Mortgage Examination” (sometimes called the tracker mortgage redress
scheme) do not have to file amended tax returns in respect of the compensation for
the years impacted by the compensation payments, nor do they have to take
account of the payments in filing future returns or in calculating preliminary tax
liabilities. This applies only to compensation payments received as part of the
Central Bank’s Tracker Mortgage Examination that commenced in December 2015.
For example, taxpayers who receive compensation under the redress scheme in
2018, which covers all years up to and including 2018, do not have to file amended
tax returns for years to 2017 to take account of the compensation payment, nor do
they have to take account of such payment in rental computations for their 2018
returns.
Similarly, taxpayers who receive compensation under the redress scheme in 2019,
covering all years up to and including 2019, do not have to file amended tax returns
for years up to 2017, take account of such payments in rental computations for their
2018 returns, or take account of such payments in calculating their preliminary tax
liabilities for 2019. The payments also need not be recorded on their 2019 return
when that is due for filing.
In some cases, taxpayers may have had their mortgage account corrected in an
earlier year but do not receive the compensation until a later year. For example, a
taxpayer may have their mortgage account corrected in 2016 but did not receive a
compensation payment until 2019. In such cases, the taxpayer does not have to file
amended tax returns for the years up to 2016 to take account of the compensation
payment. The compensation payment has no bearing on 2017 or subsequent years
so the question of amending the returns for those years does not arise.
I am one of the AIB 5,900 group who received a loan write down and cheque in settlement of the AIB tracker issue. My loans were Buy to Let loans. I have been curious as to what tax issues could arise re these settlements. I am aware that in the booklet that was with the letter from AIB covering the settlement, there is a paragraph stating that AIB will look after any taxes should they arise. That to me was comforting but it did leave me wondering how could AIB know what personal tax situation.
I did a bit of digging re this issue and found a Revenue Commissioners statement which I have copied in bold below. This to me gives more comfort as it says the lender is responsible for any tax. However, I want to be 100% sure. The big issue to me is that I have claimed substantial tax reductions on loan interest that ultimately AIB has refunded. So, have I potentially over claimed the tax relief. Has anyone any experience and/or knowledge re this? To be clear, I think I have enough clarification to adopt the position of no tax adjustments are necessary, but I would appreciate comments re specific Revenue or tax advisor experience. Many thanks.
Tax and Duty Manual Part 04-08-19
1
Income tax implications for landlords with buy-to-let
mortgages who receive tracker mortgage redress
payments from lenders
Part 04-08-19
Document last updated August 2019
____________________________________________________________
Tax and Duty Manual Part 04-08-19
2
The Central Bank has published Guidance: Principles for Lenders when Tracker
Mortgage Related Issues Identified for Redress. At Appendix B of Appendix 3,
“Supplementary Guidance for Redress and Compensation for Tracker Mortgagerelated
Issues”, Paragraph 1.3.4., on page 8, this document states:
Any tax liability that impacted customers may incur as a result of the relevant
issue or in respect of any redress, compensation or other payment made to
impacted customers by the lender, as a result of the relevant issue, are to be
discharged by the lender. The lender is to liaise directly with Revenue in this
regard.
As the lenders are required to discharge any tax liabilities on behalf of the customers
and liaise directly with Revenue, taxpayers who receive compensation under the
“Tracker Mortgage Examination” (sometimes called the tracker mortgage redress
scheme) do not have to file amended tax returns in respect of the compensation for
the years impacted by the compensation payments, nor do they have to take
account of the payments in filing future returns or in calculating preliminary tax
liabilities. This applies only to compensation payments received as part of the
Central Bank’s Tracker Mortgage Examination that commenced in December 2015.
For example, taxpayers who receive compensation under the redress scheme in
2018, which covers all years up to and including 2018, do not have to file amended
tax returns for years to 2017 to take account of the compensation payment, nor do
they have to take account of such payment in rental computations for their 2018
returns.
Similarly, taxpayers who receive compensation under the redress scheme in 2019,
covering all years up to and including 2019, do not have to file amended tax returns
for years up to 2017, take account of such payments in rental computations for their
2018 returns, or take account of such payments in calculating their preliminary tax
liabilities for 2019. The payments also need not be recorded on their 2019 return
when that is due for filing.
In some cases, taxpayers may have had their mortgage account corrected in an
earlier year but do not receive the compensation until a later year. For example, a
taxpayer may have their mortgage account corrected in 2016 but did not receive a
compensation payment until 2019. In such cases, the taxpayer does not have to file
amended tax returns for the years up to 2016 to take account of the compensation
payment. The compensation payment has no bearing on 2017 or subsequent years
so the question of amending the returns for those years does not arise.