Tax Relief at Source

Hello,

I have a problem and need some advice. I have two properties, my own private residence and a let property which was my original home. We lived in the original property from 2000 to 2006 and then bought a larger property and moved. We kept the first house and it has been let since to tenants.

When we bought the new house, we split the total new mortgage with a new banking institution equally between the two houses. This meant that the actual mortgage amount for the new house, now our principal residence, was split between two loan accounts. The original mortgage for the first house bought in 2000 was significantly lower than the amount of the loan account for this property.

When discussing this with Revenue back in 2006, they told me that the Tax Relief at Source could be claimed on both mortgage accounts, as some of the amount on the original property was related to my principal residence. So they set this up and I was receiving TRS on both loans pro rata to the original split.

Now I have been contacted by Revenue stating that I should not be claiming TRS on the loan amount on the let property, even if it is related to the Principal property.

So...can I get your view on this? I believe that the Revenue were right in 2006 to split the TRS between the two loans, contrary to what they are telling me now. However, if it's not the case, surely they were in the wrong originally for setting this up for me? Their latest statement is "only your Principal Private Residence is eligible for interest relief", so I am being charged for years of claimed TRS. This statement is ok, but surely it does not preclude the amount being split between two properties?

Looking forward to your views.

FranJ

To set some context the number would be helpful.

So let's say the outstanding mortgage on your original home was €50k and your new loan was €200k so one loan was €125k and the other loan was €125.

So you were entitled to home loan interest relief on the €125k and €75k of the €125k according to Revenue in 2006. The interest on the €50k is available as a rental deduction.

http://www.revenue.ie/en/practitioner/law/notes-for-guidance/tca/part08.pdf

Now it gets complicated see page 20, to be eligible for TRS the loan should be secured on the qualifying residence!

So you are entitled to home loan interest relief on the loan secured on your former home but on your income tax return rather than TRS. It's rather bizarre that anyone would try and withdraw the TRS. while not giving the taxpayer the benefit of the home loan interest relief which would eliminate the liability.

Do you have anything in writing from Revenue in 2006?

Hi Joe,

Thanks for your reply. The numbers are close enough to actual figures to work. What I get from your comments is that even if they reject my argument, I can still claim tax relief on the extra interest on rental property that I didn't claim (luckily I played by the rules and only claimed interest relief on the original amount...i.e. the interest on the 50K in your example).

To answer your last question, everything was done by telephone so nothing in writing from Revenue!!

What still annoys me that, even if the TRS is only available on a loan secured on the qualifying residence, then why would the current arrangements have been proposed and put in place at the time in 2006...on their advice!!

FranJ.

To set some context the number would be helpful.

So let's say the outstanding mortgage on your original home was €50k and your new loan was €200k so one loan was €125k and the other loan was €125.

So you were entitled to home loan interest relief on the €125k and €75k of the €125k according to Revenue in 2006. The interest on the €50k is available as a rental deduction

Now it gets complicated see page 20, to be eligible for TRS the loan should be secured on the qualifying residence!

So you are entitled to home loan interest relief on the loan secured on your former home but on your income tax return rather than TRS. It's rather bizarre that anyone would try and withdraw the TRS. while not giving the taxpayer the benefit of the home loan interest relief which would eliminate the liability.

Do you have anything in writing from Revenue in 2006?[/QUOTE]

What I get from your comments is that even if they reject my argument, I can still claim tax relief on the extra interest on rental property that I didn't claim (luckily I played by the rules and only claimed interest relief on the original amount...i.e. the interest on the 50K in your example).

Click to expand...

I wonder if this is what is causing the confusion. Is the person from Revenue saying you are not entitled to TRS on the "PPR element" of the loan on the rental property and assuming that you were also claiming the interest as a rental deduction?

The issue with the home loan interest claim on your tax returns for earlier years is that you can only go back 4 years.