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The Irish Independent reports
that homeowners already struggling with their mortgage repayments have been
dealt a new blow by the taxman.
Revenue officials have ordered banks to stop
mortgage interest relief for households more than six months behind on their
The relief is worth up to €4,000 a year for a
couple in cases where both partners are named on the mortgage.
Now fears are mounting that thousands of
households will be denied the tax relief, which can substantially lower monthly
repayments, especially for those who bought during the boom. Around 65,700
residential mortgage accounts are six months or more in arrears.
A spokeswoman for the Revenue Commissioners told
the Irish Independent that where no payments have been made on a mortgage for
six months or more the taxman has now ordered that the valuable mortgage tax
relief be removed.
"Where no payments have been made for six months,
the relief is ceased," the spokeswoman said.
"In the event of resumption of payments, then the
relief can be restored following three consecutive payments."
Mortgage tax relief is a payment made to the
banks of mortgage holders who qualify. It goes to the lender, with the bank then
using the money to reduce the monthly payments.
Around 350,000 households are getting the relief.
Those who meet the criteria and buy a house will still qualify for it if they
buy before the end of this month. The relief lasts seven years.
A couple with a €300,000 mortgage on an interest
rate of 3.5pc could be getting €2,100 in relief a year. For bigger mortgages,
the relief that can be claimed is capped at €4,000.
Last year, the Government gave extra mortgage tax
relief to those who bought during the boom, with the additional relief worth up
to €2,000 a year.
But now Revenue has written to all mortgage
lenders telling them to take the relief off of anyone who has not paid their
mortgage for six months or more.
A spokeswoman for Revenue said: "In light of
increasing non-payment or arrears of mortgage payments, and to protect the
Exchequer where clearly eligibility no longer exists, Revenue advised lenders in
October that relief should be calculated by the interest-paid method only."
This means tax officials will only allow the
relief for mortgage holders who are paying the interest on their home loan.
Until recently, it was enough for a mortgage
holder to be charged interest on their mortgage to qualify for tax relief.
Consumer advocate Brendan Burgess questioned if
it was worth Revenue's while to go after people who the tax officials regarded
as no longer entitled to mortgage interest relief.
Mr Burgess, who founded the www.askaboutmoney.com
website, said not all of those who were six months or more in arrears would lose
their mortgage interest relief.
This is because those who missed six months of
payments may have since reached a deal with their bank to pay back some money
Paul Joyce of the Free Legal Advice Centres (FLAC),
an organisation that helps people in mortgage distress, said the Revenue move
was a new blow to struggling homeowners.
"This is another nail in the coffin for those who
are finding it hard to meet their mortgage payments," he said.
Only those who have struck a deal with their bank
on repaying some money, and hold to the arrangement for a year, will now qualify
for mortgage interest supplement, said Mr Joyce.
Meanwhile, Permanent TSB is caught up in nearly
500 legal cases involving troubled mortgage holders.
The bank has told the Department of Finance that
most of the cases relate to "debt recovery" and enforcement.
The figures only cover cases currently active,
and do not include cases that have been settled.
The Irish Independent also
reports that the former Anglo Irish Bank has been hit with a barrage of legal
cases from former clients of its private client unit, the Irish Independent has
The cases relate to the arm of the bank that put
together syndicates of wealthy individuals and families to invest in major
commercial property deals during the boom.
As well as assembling the investors, Anglo
provided loans to finance the deals and in some cases even bought properties to
sell to its own clients.
Legal papers linked to more than a dozen separate
actions have been filed at the High Court over the past two months, naming Irish
Bank Resolution Corporation (IBRC) Assurance as defendant.
While IBRC is the new name for Anglo, the Irish
Independent understands that the cases relate to actions allegedly taken by the
bank before it was nationalised.
IBRC Assurance is part of the state-owned bank's
wealth management business which was involved in selling properties worth
billions to groups of wealthy Anglo customers.
The "Assurance" was the part of the unit set up
to handle investments made by the self-administered pension funds of wealthy
clients. It is separately regulated by the Central Bank.
The timing of the recent spate of cases is driven
by a statute bar that means legal action cannot be taken against the bank more
than six years after an investment was originally sold.
It means unhappy investors who invested in late
2006 deals must file papers now or lose the right to sue.
The cases are understood to be mainly at an early
stage and may not reach the courts for more than a year.
The bulk of the recent High Court papers have
been filed on behalf of clients by two firms of Dublin solicitors, O'Grady
Solicitors in Ballsbridge and LGK Ballagh in Glasthule.
Both firms declined to comment on the actions, as
did a spokesman for IBRC.
During the boom the Anglo unit set up as many as
50 funds to invest in property deals, many of which have gone sour.
In one high-profile case clients of Anglo
invested close to €100m of the €390m used to buy the Woolgate Exchange office
block in London.
Their investment was wiped out when the office
block was sold for €330m earlier this year. The bank managed to claw back some
of its own losses when it sold a loan backing the deal to the new owners.
Of the current batch of actions, it is thought
that a number relate to cases where Anglo bought property in its own name then
sold the assets to private banking clients who were provided with loans to
finance the deals.
High net worth clients of the assurance unit
typically invested €1m to €2m to participate.
It means some clients have seen their investments
wiped out because of falling property prices, but they remain on the hook for
loans to IBRC.
The Irish Times reports that
the Government was subjected to an intense lobbying campaign by the
pharmaceutical industry earlier this year over a HSE decision not to approve for
payment new drugs and medicine.
Taoiseach Enda Kenny was warned the decision
could have implications for 25,000 jobs and future investment.
Early this year, the HSE decided not to reimburse new drugs that had passed all
regulatory stages and were becoming available for use in patients. They included
drugs for treating skin cancer and cost up to €85,000.
In correspondence with Mr Kenny, up to 20 multinational drug firms claimed that
the HSE move was portraying Ireland negatively and could have “unintended
consequences” for Ireland.
The details have emerged against a backdrop of continuing controversy over the
price of medicines and Government efforts to curb costs, including the cost of
drugs. A recent survey found that the cost of some medicines here is among the
highest in the world.
It has also emerged that the price paid for drugs in Ireland is of critical
importance for pharmaceutical companies as it influences the price in many other
countries, both within and outside the EU, as part of an international
Earlier this year the HSE argued that no specific budget had been provided to it
to pay for the cost of new drugs and medicines coming on the market after
However, the multinational drug companies argued that a ban on reimbursing new
drugs by the HSE represented a breach of a supply agreement with the State.
In June Minister for Health James Reilly reached an interim deal with the
pharmaceutical industry that involved reductions in the price of certain
off-patent medicines. He claimed this could save up to €20 million in a full
As a condition of the agreement the HSE was obliged to add to its list of items
for reimbursement “drugs which in the normal course of events would have been
approved under its schemes”.
In effect, this meant that the HSE could not refuse to pay for drugs for
In October the Government secured a full agreement with the pharmaceutical
industry which it said could generate €400 million in savings over three years.
In return for making price concessions, the pharmaceutical companies reinforced
the principle that new medicines will be approved under the HSE’s drug schemes
once they have been proven to be cost effective.
However, new documents released by the Government show that Mr Kenny received
strong representations on the cuts by leading pharmaceutical companies. The
letters had been written in February and March and many struck a similar tone.
In one, the president of Eli Lilly, John C Lechleiter, was concerned that “your
Government’s recent decision not to reimburse new medicines puts at risk this
aspiration and portrays Ireland negatively to inward investors such as Lilly”.
Mr Lechleiter pointed out that Lilly employed more than 700 people in Ireland in
two manufacturing sites. “I believe further price cuts and a blanket ban on
reimbursement of new medicines could have a number of unintended consequences
for the wider Irish economy.”
The chairman of Johnson and Johnson, William C Weldon, told Mr Kenny in a
letter: “When new medicines are scientifically and independently judged to be of
value and improve health outcomes, it is imperative that they are made available
to Irish patients.”
The Irish Times also reports
that the tax reliefs for the Irish film and television industry are inefficient
and too generous towards wealthy investors, a Government report has stated.
The economic impact assessment carried out by the
Department of Finance found it would be a third cheaper for the exchequer to
simply give money to productions than continue with the present section 481
The report said it would be better to fund
productions by means of a tax credit paid shortly after a minimum level of
expenditure was complete.
In the budget, Minister for Finance Michael
Noonan said the section 481 reliefs would be extended to 2020, but from 2016
would be changed to a tax credit model. He said investors were receiving a
disproportionate amount of tax relief.
The report found a third of money that could be
going to productions was going to financiers who organised section 481 reliefs
and in profits to investors.
Investors, who could write up to €50,000 off
against tax by investing in section 481 schemes, were receiving substantial
returns on minimal-risk investments.
In one case cited, an investor made a return of
23 per cent in just 10 weeks, having invested €16,150 in a production while
borrowing twice as much on a short-term basis from a bank.
Three quarters of investors had income in excess
of €100,000. The report said allowing high-income individuals to shelter money
in this way was contrary to Government policy to abolish such shelters.
At present, section 481 reliefs cost the State
€46.1 million a year in lost revenue. Producers receive about two thirds of
this, or €32 million; a third goes in fees and profits to investors.
The report states that if the producers’ €32
million came straight from the State, it would amount to a net saving to
taxpayers of €14.1 million in a single year. Under the current system, a
production company can raise up to 22 per cent of the total cost of a production
through section 481 reliefs.
Individuals can write off €50,000 against tax as
an expense, saving €20,500 at a rate of 41 per cent. It amounts to a net cost to
the investor of €29,500. The investor can usually expect to get the €29,500 back
once the film is completed, plus a small net profit.
Tax credit model
Element Pictures producer Andrew Lowe said the
typical return was €4,500 for a €50,000 investment, or 9 per cent.
He said the crucial factor in any tax credit
model was that the money was available up front. Otherwise production companies
would incur costs in borrowing it from a bank.
Irish Film Board chief executive James Hickey
said the Government’s willingness to listen to the film industry and act in its
best interests was evident in its commitment to the tax credit plan.
On the same day the Government announced the
budget here, the UK chancellor of the exchequer George Osborne announced that
high-end television programmes there would receive a 25 per cent break which
might hit Ireland’s attractiveness as a location for British television
Mr Hickey said it was important that whatever tax
relief was brought in was competitive.
“The Government is very conscious of the need for
us to be competitive against other jurisdictions,” he said.
The Irish Examiner reports
that Banks are being accused by Isme of adopting "cynical delaying tactics" in
the way the financial institutions are handling loan applications.
Isme, the Irish small and medium enterprises
association, is furious after analysing its latest Quarterly Bank Watch Survey
which shows a decline in lending to SMEs. The survey found the 53% of businesses
are being refused loans, four points worse than the figure in September.
Isme chief executive, Mark Fielding, said the demand for bank credit is steady
"The delays by cynical bankers has coined a new phrase, ‘constructive refusal’
as they treat the customer with disdain and hoodwink the Government with
continuing distorted statistics.
"There is no doubt that banks are not lending to the level appropriate to an
economy ‘on the mend’. The statistics from our own Central Bank, the ECB and
numerous economists demonstrate the dearth of appropriate credit. We must put an
end to the fiction that bailed-out Irish banks are functioning properly. Despite
assertions from the banking PR machine, access to credit is abysmal, the
application process is getting more torturous and businesses are not being told
their rights under the code," he said.
Among the main findings of the survey were:
* 53% of companies who applied for funding in the last three months were refused
credit by their banks, a deterioration on the 49% in the previous quarter.
* 39% of respondents had requested additional or new bank facilities in the last
three months, showing an increase from the 38% in the previous quarter.
* 28% of initial bank decisions were made within one week; however the average
wait was four weeks.
* 65% of firms state banks are making it more difficult to access finance, down
* 5% of SMEs believe Government is making a positive difference to SME lending.
* 46% of respondents had increases in bank charges imposed, as banks revert to
Mr Fielding said it is disappointing in the extreme that, after all of the
bailing out and cosseting of banks and bankers, the main rescued banks are not
stepping up to the plate.
"The Government, in last week’s budget, acknowledged the importance of the small
and medium-enterprise sector and introduced measures to assist. The Government
must now demand that the bailed-out banks meet their own commitment to SME
lending," he said.
The ISME boss said the Government must stop merely acknowledging that we have a
banking problem and act decisively.
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