Confirmed: Banks to repay TRS To Revenue

Bronte

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Mortgage interest relief was abolished years ago in the UK so the issue wouldn't arise.

I do know that compensation paid in the context of the PPI scandal was taxable in the hands of the policyholders.
Sarenco I was more interested in how compensation is applied for overcharging than the issue about TRS. Would you happen to know. Also I wonder how the ombudsman rules over there in such cases where there is long term overcharging.

The taxation aspect is a matter for revenue, if it were me I'd have sent an email to revenue for a decision on it. But I personally think given the stress people have been under that it should not be taxable, like compensation for personal injuries. Of course revenue have to look to the law so I suspect it is taxable.
 

Sarenco

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But I personally think given the stress people have been under that it should not be taxable, like compensation for personal injuries. Of course revenue have to look to the law so I suspect it is taxable.
I don't disagree but no legislation was adopted to make it so (unlike the various other non-statutory redress schemes; HepC, residential institutions redress, etc.).

Revenue and BOI have already agreed how excess TRS payments will be dealt with.
 

Bronte

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So if revenue have an agreement with BOI then it should be the same for all other banks.
 

noc231073

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So now you have me totally confused ..
The article state that the banks should bear the COST ! of TRS repayments ..
not just pay it out of the money they owe the customer..
If that's the case give me my money and I'll pay the revenue.. with what I have left when I pay my bills and borrowing I had to make to keep a roof over my family's head while they robbed me blind for the last 6 years to the value of 350-500 a month ... in over payments!!!!!
 

Sophrosyne

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Yes, they are remitting the payment to Revenue out of a sum that would otherwise be paid to the customer. That sum comes from their own funds.

To my mind, discharging a liability and bearing the cost of that liability are one and the same thing.
The sums certainly do not come from their own funds. They are deducting the TRS overpayment from refunds due to customers as a result of overcharging interest.

The method is just an expedient, probably agreed with Revenue, to reduce Revenue contacts.

If the full amount was paid by the banks then each customer would have to deal with Revenue separately to pay the over-allowance of TRS.
 

Sophrosyne

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And where does that gross amount come from? The bank's own funds.
The gross amount is what the banks owe the customer.

This then becomes the customer's money.

The customer, and not the bank, is liable to pay, out of that amount, any over-allowance of TRS.

What confused the issue for impacted customers was the Finance Minister's assertion that "that banks which overcharged customers would bear the costs of the additional interest relief those customers received from Revenue.

Either he or the bank(s) is misinformed.
 

Sarenco

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The customer, and not the bank, is liable to pay, out of that amount, any over-allowance of TRS.
Yes, the customer and not the bank is liable for the excess relief. The bank is now discharging that liability on behalf of the customer.
What confused the issue for impacted customers was the Finance Minister's assertion that "that banks which overcharged customers would bear the costs of the additional interest relief those customers received from Revenue.
I don't find that statement at all confusing and it reflects my understanding of what is happening in practice.
 

Sophrosyne

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Yes, the customer and not the bank is liable for the excess relief. The bank is now discharging that liability on behalf of the customer.
As mentioned the refund belongs to the customer and not the bank. The bank subtracts the TRS over-allowance from the customer's money and pays it to Revenue.

It is the same as when an employer deducts tax from employee salaries and remits it to Revenue on behalf of an employee. The employer is not discharging the employee's the tax liability; the employee is.

The Finance Minister in his reply to Paul Murphy said that the banks would bear the liability for the TRS over-allowance themselves, i.e. that individual customers would have no liability in the matter.

Were that the case then the banks would pay the excess TRS out of their own funds and not deduct it from customer refunds.
 

Sarenco

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Frankly, I'm amazed that you want to continue this discussion. Don't you find it boring?

Yes, the bank is withholding and remitting excess TRS to Revenue. That is crystal clear.

The Minister said the banks would bear the cost of the TRS repayments. I don't see anything ambiguous about that statement and it reflects what I understand is happening in practice.

The bank will transfer the relevant sum to Revenue from an account maintained and controlled by the bank. In other words, it will bear the direct cost of discharging the liability.

If you still feel the Minister's statement was confusing then I suggest you bring it up with the Minister.
 

Sophrosyne

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And I am amazed that with evidence to the contrary on this site,you still maintain that the banks bears the cost of excess TRS when it is quite clear that they do not.

Doesn't it mean anything to you that the customer refunds were reduced by excess TRS?
 

Sarenco

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Look, if I owe you money and pay your bar tab wouldn't it be fair to say that I have borne the cost of your bar tab?

I may still owe you money - clearing your tab may only partially discharge my liability to you - but that doesn't change the fact that I have borne the cost of your bar tab.

The Minister said the banks would bear the cost of the TRS repayments and that is what is happening.

Again, it is crystal clear that the bank is withholding a sum from the redress payment, reflecting the excess TRS received by its customer, and remitting same to Revenue. Nobody is suggesting otherwise.
 

Thomas

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In the bar tab analogy you have not borne the cost of the tab you have administered the collection and that is very different to bearing the cost.
 

Sarenco

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In the bar tab analogy you have not borne the cost of the tab you have administered the collection and that is very different to bearing the cost.
No, I took out my wallet and handed over the cash. I definitely bore the cost of the tab.
 

Thomas

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As a result of doing that you simultaneously discharged your obligation to your friend - need to factor that in so that on a net basis you did not bear the cost.
 

Sarenco

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As a result of doing that you simultaneously discharged your obligation to your friend - need to factor that in so that on a net basis you did not bear the cost.
Yes, by clearing the bar tab I simultaneously partially discharged my liability to my friend.

Same way that the banks are partially discharging their obligation to their customers by bearing the cost of refunding any excess TRS payments.
 

Thomas

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I think I will head to the bar also as I don't be think we will ever agree on this!
 

Emma3003

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The (time value of money) interest payment on the redress amount just put the policyholder back into the same position that they would have been in if the overcharging had not taken place.

The compensation amount over and above that was taxable.
Maybe we are saying the same thing, but it’s getting lost in translation as I’m not as experienced in this area.
It is my understanding that compensation in the context of PPI reclaims consists of two parts:
1) Refund of PPI payments
2) Refund of any Interest paid by the customer on the premium

Interest was then paid on this compensation at a rate of 8% per annum. It is only this amount that is subject to tax, not the actual compensation itself.

Is that right Sarenco?
 
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