Will tracker refund and compensation be taxable?

joestrand

Registered User
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14
Is compensation that will be paid by AIB considered liable for taxation by Revenue

Similarly is any interest that will be paid by AIB on overpayments c
 

Sarenco

Frequent Poster
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5,584
Remember what I said in a previous post about whiplash, the same applies here!
Hi Toledo

I believe you told us on another thread that you work for Revenue.

I wonder could you tell us what position Revenue is taking on (what may turn out to be) TRS overpayments or whether any compensation payments will be subject to income tax?

Many thanks.
 
T

Toledo

Guest
In general, court award damages for breach of contract/overpayments are not subject to tax. This is because awards of court-based damages are computed net of tax liability. This means that a contract breaker does not normally pay the gross amount, of, for example, loss of earnings. This rule has arose as a result of caselaw and has not arisen from statute or legislation.

This is however, dependant on the proceeds not being in respect of something which would then be taxable subsequently. This would occur where, for example, compensation payments are made by a financial institution into a payments policy which subsequently matures. The amount of the policy would be subject to tax upon maturity. However, the amount of damages received would not be taxable.
 
T

Toledo

Guest
In relation to compensation settlements outside the court arena, be careful when signing the agreement that the bank do not put in a clause in the settlement agreement were the financial institution waives all responsibility regarding any tax liability. Presently, Revenue's position is that it will not be making compensation awarded in this regard, subject to income tax.
 

Sarenco

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5,584
Many thanks Toledo.

Can you point me to the specific statutory provision that allows Revenue to determine that any extra-judicial redress/compensation payments in this respect are not subject to income tax?

I am aware that there are specific statutory provisions that exempt certain specific extra-judicial redress payments from income tax and I am curious what legislative authority Revenue has for exempting these particular payments from income tax.

I'm confused as to how or why the relevant financial institution making the redress payment could have any possible tax liability for the payment. Perhaps you could clarify this point?

Also, could you address the issue in relation to possible TRS overpayments as this is undoubtedly a key concern for many impacted borrowers?

Thanks again.
 
T

Toledo

Guest
What I will say to you Sarenco, is that interpretation of tax law is a function of revenue. Have a good weekend.
 

Sarenco

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Well, the interpretation of our laws (including tax laws) is actually a function of the Courts under our constitution.

Anyway, I've obviously taken up enough of your time on a Friday evening but I'm sure your input on these issues would be greatly appreciated by affected borrowers given your position so perhaps you could come back to us when you do have some time.
 
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T

Toledo

Guest
Sarenco, just to clarify what I meant in my last post. The interpretation of the T.C.A. is a function of revenue vis a vis the filer of the return and revenue. Revenues interpretation of the Acts towards the filer is the stated position. The filer is of course, within their right to challenge this position through the courts and on instances has won in this regard. I hope this clarifies my last post.

In relation to your query on Tax Relief at Source, the following link from PTSB is quite comprehensive and should answer your questions- https://www.permanenttsb.ie/help-and-support/help-with-banking/product-support/mortgage-support/changes-to-tax-relief-at-source-trs/tax-relief-at-source-faqs/ If, in the unlikely event that it does not, then I suggest you contact trsadmin@revenue.ie as I operate within another area of revenue.
 

Sarenco

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Thanks Toledo but that doesn't really address either of my questions.

Again, the interpretation of our laws (including TCA) rests with our Courts. Revenue cannot simply decide that a payment is, or is not, taxable - it must have a legislative foundation. If you don't know the answer that's obviously fine.

The link to the PTSB site doesn't appear to address the question as to what happens where an interest rate is subsequently adjusted such that it transpires that a borrowers has received an overpayment of MIR. Again, if you don't know the answer to the question that's obviously fine.
 
T

Toledo

Guest
Ok Sarenco, let us look at a section 110 company structure which has been in the spotlight recently.

Section 110 companies are allowed to calculate profits according to the old Irish generally accepted accounting principles (GAAP 2004) instead of the new Irish GAAP or International Financial Reporting Standards (IFRS). Dillon Eustace law firm, which advises Ireland’s National Asset Management Agency and Lone Star, among others, says the legislation was amended after industry successfully lobbied Revenue over concerns that International Accounting Standards “could compromise the profit neutrality of an SPV”.
The 2010 transfer pricing rules do not apply to Section 110 companies.

Total return swaps, where the SPV swaps all of its receipts with another company in its group in return for enough funds to discharge liabilities, should be liable to tax but apparently are not in practice and are used as a profit-extracting mechanism. “There is a technical liability to Irish income tax for recipients (i.e. the swap counterparty) who are not resident in a country with which Ireland has a double tax treaty but, in practice, this liability is not enforced by the Irish tax authorities.”

There is an example of revenue using their discretion as to how to apply the TCA, not everything in revenue is black and white. Revenue can and does interpret the TCA.
 
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Sarenco

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Sorry Toledo but I'm even more confused now.:(

Are you saying that Revenue has decided not to pursue any income tax liability that may be due on any redress payment and will not seek to recover any MIR overpayment? Has this decision been published anywhere?

Hopefully you will appreciate why impacted borrowers are seeking clarity on these matters.
 
T

Toledo

Guest
No read my post again, you appear to be a clever person. What I am saying is that Revenue interpret the TCA and can amend their application of same, that is all. Phone revenue on Monday and get a definitive answer in relation to your TRS question as I reiterate this is not my area of expertise.
 
T

Toledo

Guest
Ok. So you don't know the answer to either of my questions. Is that fair?
I have already stated I cannot give you a definitive answer on your questions re TRS and that maybe you should contact trsadmin@revenue.ie as this is not my area of expertise. However I assert again that revenue can interpret the TCA and amend how they apply them, are we in agreement in this regard ?
 

PadKiss

Frequent Poster
Messages
215
Hi all
In regards to the Revenue questions being raised the following is from the PTSB Redress letter and should be the same for the other lenders
"We have been in discussions with the Revenue Commissioners and any tax issues arising are being addressed directly by us. Accordingly, you do not need to take any action in this regard"

Hope that clarifies it for people affected Padraic
 

Sarenco

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Toledo

With respect, I didn't ask you whether Revenue could interpret legislation - I asked if you knew whether Revenue had a position on two very specific issues.

At this stage I assume you don't know the answer to either question. That's obviously fine.
 
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Sarenco

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5,584
"We have been in discussions with the Revenue Commissioners and any tax issues arising are being addressed directly by us. Accordingly, you do not need to take any action in this regard"

Hope that clarifies it for people affected Padraic
Hi Padraic

Could you elaborate on why you think that letter from PTSB clarifies the tax position? Do we know what position Revenue adopted in their discussions with PTSB and whether any such position is of broader application?

Many thanks.
 
T

Toledo

Guest
There you have it Sarenco, look likes the banks are taking any hit in this regard, you got your answer and I got mine, that being that you are not man enough to admit revenue can interpret the TCA and apply same and that we are not hamstrung by legislation as you contend. Please do not contact me further on this site as refusal to answer posts often offends. The original post was "AIB to pay 15% compensation" and you managed to drag this post well off subject matter much to the annoyance of Brendan Burgess.
 
T

Toledo

Guest
Hi all
In regards to the Revenue questions being raised the following is from the PTSB Redress letter and should be the same for the other lenders
"We have been in discussions with the Revenue Commissioners and any tax issues arising are being addressed directly by us. Accordingly, you do not need to take any action in this regard"

Hope that clarifies it for people affected Padraic
Padkiss,

Thank you for the clarification I hope that poster Sarenco can now sleep soundly tonight. ( He is probably not even affected by the subject matter of this thread )
 
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