Lenders may have duped unwary borrowers out of thousands of pounds due to a loophole in the way Miras is applied.
Under the current regime, which comes to an end on 6 April, lenders who apply the tax relief have to be accredited by the Inland Revenue.
Borrowers applying for a mortgage over £30,000 are issued with a Miras 70 statutory declaration – or a Miras 76 for remortgages – by the lender.
On successful completion, the borrower is eligible for tax relief, currently worth about £19.35 per month on loans over £30,000, or £232.20 per year.
But some borrowers may have filled out the form incorrectly. As a result, and as there is no provision in statute for lenders to inform the borrower of their mistake, thousands of people could have lost out on a small fortune.
Although lenders have to be accredited to pass on the benefit, once approved and accepted under the scheme “then that is it”, according to the Inland Revenue.
Figures were not available as to how many lenders are currently accredited under the Miras scheme. But the Revenue confirmed the potential did exist for lenders not to pass on the benefit as the Revenue accepted lenders’ Miras returns without a full audit taking place.
While most lenders, claims are audited “regularly”, the frequency depends on the size of the lender and what the Inland Revenue perceives the risk to be. They could not define how often ‘regularly’ meant, whether it was every two, three, four or five years.
Mortgage Solutions has heard evidence from at least one borrower where Miras has not been applied to their account. Due to legal reasons, we are prevented from revealing the names of the parties involved.
The Revenue said: “We do audit claims for Miras, but not all of them as it would be too big a scheme to monitor. But before any lender is approved under the scheme, we will have already established whether or not they are a reputable lender and whether or not they can be trusted.”
In 1990, when rates stood at 14.5%, for a higher rate tax payer with a mortgage over £60,000 Miras would have been worth £145 per month, a £1,740 per year tax perk. If a lender had persistently failed to pay the perk or notify the customer of its mistake, the borrower could have lost out on a small fortune. But the Revenue doubted how long a lender would be able to get away with it before being found out.
It said: “There does not seem to be anything a lender would have to gain from withholding Miras benefit. The lender recovers the relief from us and before we would take back any money we would check that it is correct. If the borrower fills out the form they are given the right amount of tax relief.
“At the end of the day, the onus is on the borrower to fill out their Miras form correctly. It is unlikely to be a major factor if somebody cannot meet their repayments.”
A spokesperson for one of the largest high street lenders said: “Some lenders have millions of mortgages and it would be quite difficult for a full audit to take place. I imagine the Revenue would come down hard on a lender for deliberately doing this.”