Dáil Éireann - Volume 641 - 20 November, 2007
Written Answers. - Revenue Audits.
Deputy Michael D. Higgins Deputy Michael D. Higgins
Deputy Michael D. Higgins asked the Tánaiste and Minister for Finance the number of individual claims examined in detail by the Revenue Commissioners other than as part of field audits in 2003, 2004, 2005 and 2006 in respect of mortgage interest relief, given by way of tax relief at source; the percentage of those claims disallowed; and the number of cases referred for prosecution. [29566/07]
Deputy Eamon Gilmore Deputy Eamon Gilmore
Deputy Eamon Gilmore asked the Tánaiste and Minister for Finance the number of field audits carried out by the Revenue Commissioners on financial institutions in 2003, 2004, 2005 and 2006 in respect of mortgage interest relief, given by way of tax relief at source; the number of individual claims for TRS examined during those audits; the yield in tax, interest and  penalties arising from those audits; the number of cases referred for prosecution; and the number of planned filed audits to be carried out by staff of the Revenue Commissioners in 2007. [29565/07]
Deputy Brian Cowen Deputy Brian Cowen
Deputy Brian Cowen:I propose to take Questions Nos. 69 and 108 together.
I am advised by the Revenue Commissioners that mortgage interest relief is applied at source since 1st January 2002. Under this scheme, a borrower applies for tax relief on a self-declaration basis. The relevant institution then confirms the existence of the loan and once approved by Revenue, the lender, in most instances, reduces the monthly mortgage repayment by the correct amount of tax relief as instructed by Revenue. Revenue in turn credits the lender with the sum of the tax reliefs applied.
A qualifying loan for the purpose of mortgage interest relief is a secured loan, which must be used solely for the purchase, repair, development or improvement of a principal private residence. Where a part of a loan is used for any other purpose, only the percentage relevant to the principal private residence qualifies for mortgage interest relief.
There are a number of facets to the comprehensive compliance programme operated by Revenue part of it focused on the lenders and part of it focused on the mortgage holders.
There are 15 main lenders registered to operate tax relief at source, with additional institutions, for example Credit Unions, administering a small number of mortgage loans. In 2003, a programme of compliance visits to main lenders was initiated. The purpose of these visits is to ensure that each lender is administering the TRS system in accordance with the provisions laid out in Section 244A of the Taxes Consolidation Act 1997 and with agreed operational guidelines. The compliance visit will also ensure that the tax relief is applied to the correct mortgage account correctly and at the earliest opportunity. To date, all major mortgage lenders have been subjected to compliance visits for tax relief at source. Sixteen such compliance visits have been undertaken by Revenue since 2003.
In relation to individual mortgage holders, while Revenue examines all applications for mortgage interest relief at application stage, the “qualifying loan” condition as defined above operates largely on a presumption of honesty basis in accordance with Revenue’s Customer Charter, based on a declaration by the taxpayer.
All loans are also monitored through the monthly electronic exchange with the mortgage providers and where difficulties or concerns are identified by Revenue these are followed through. As part of the overall compliance programme, interventions are also targeted at and through the lenders whereby a selection of individual mortgage accounts are examined in detail  during the visits to the lenders already alluded to. I am advised by Revenue that in the region of 50 to 80 accounts — depending on the size of the institution — are selected for intervention in each compliance visit with the lenders. While the majority of accounts are and have been found to be fully qualifying accounts, a small number require some adjustment to their mortgage interest entitlement and this is subsequently addressed by Revenue with the mortgage holder in each instance.
Since January 2007 and building on the risk assessment made by Revenue from the compliance activities already referred to, and taking account of the increase in the ceiling on mortgage interest relief for first time and non-first time buyers from 1 January 2007 a further element of the compliance campaign now involves direct engagement with the mortgage holder. The purpose of this element of the programme is to identify potential higher risk cases that may not be fully in compliance with the terms of the tax relief at source scheme and, where necessary to apply appropriate measures to bring such cases into compliance, including the withdrawal of relief and the recovery of any monies due to Revenue. In this element of the overall compliance programme so far in 2007, Revenue selected 2,133 cases for detailed review. That review has been concluded in 1859 cases. Revenue has withdrawn all the tax relief in 6% of the cases concluded and additional 8% of claims have had the percentage of the loan qualifying for relief reduced. The total value of the relief in those cases is €67,638 of which €28,015 has already been recovered. No cases have to date been referred for prosecution as a result of this element of the compliance programme.
Dáil Éireann 641 Written Answers. Revenue Audits.