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Option Mortgage Scheme

Volume 21: debated on Tuesday 30 March 1982

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asked the Chancellor of the Exchequer whether borrowers who are exempt from tax in the United Kingdom will be allowed to pay their mortgage interest payments net of tax when the option mortgage scheme is absorbed within the new tax relief arrangements in April 1983.

No. The option mortgage scheme was designed to help those with low incomes to buy their own homes by subsidising their mortgage interest payments by an amount roughly equivalent to tax relief at the basic rate. It has come to the attention of my right hon. Friend the Secretary of State for the Environment that a number of individuals with substantial incomes, but incomes which are exempt from tax in the United Kingdom, have obtained subsidies under the scheme. It was never the intention that the scheme should apply to such individuals and, if it had not been proposed to wind up the scheme in April 1983, my right hon. Friend would have laid draft regulations, under his existing powers, to exclude such borrowers. It is proposed, therefore, that the new tax relief arrangements should not apply to borrowers with tax exempt incomes I confirm, however, that other borrowers, including those with option mortgages will, under the new arrangements, get basic rate relief whether or not their incomes are sufficiently high to attract tax.