People who bought their homes since 2002 will have their mortgage interest relief cut off from May 1st, until they can show they are entitled to it.
The move comes despite assurance in the Budget that homeowners would continue to be able to claim relief for the first seven years of their mortgage.
The move by the Revenue Commissioners means that mortgage holders on up to 230,000 homes face higher mortgage bills, at least temporarily.
The people affected are those who have moved at least once. They include 118,000 people who have switched mortgage provider in recent years in search of better terms as well as those who have received top-up mortgages.
This group is likely to receive letters from the Revenue in the next fortnight, asking them to provide details of their mortgage and evidence that the money has been used for their main home rather than for other purposes, such as education fees, a new car or to pay off other debts.
The letters will seek details of when the homeloan was taken out, the loan account number, details of any switch of mortgage provider or any mortgage top-up and the percentage of the loan that was used to "purchase, repair, develop or improve" their main home.
Fine Gael finance spokesman Richard Bruton tonight attacked the Government over the move.
"Yet again, it's hard-pressed taxpayers who will have to pay for Brian Lenihan's mistake," he said. "It was well known that it was going to be much harder to implement changes to income tax midway through the year. Clearly the Minister failed to anticipate any problems and failed to put in place an implementation strategy."
Mortgage interest relief will end at midnight tomorrow for thousands of homeowners across the State. The move will mean higher mortgage bills for anyone who has owned their home for more than seven years.
Up to 230,000 other homeowners will also see their mortgage interest relief stopped - at least temporarily - until the Revenue is certain that they remain eligible for the tax relief.
Minister for Finance Brian Lenihan announced in the emergency Budget earlier this month that, from May 1st, people will only be able to claim mortgage interest relief for the first seven years of their mortgage. Until now, people received mortgage interest relief over the full lifetime of a mortgage on their main home.
The relief is worth up to €900 a year for a working couple who jointly hold the mortgage to their home. First-time buyers can receive relief of up to €5,000 per year for a working couple in the first two years of their mortgage, falling to €4,500 for each of the next three years and then €4,000. The figures are halved for individual buyers.
First-time buyers, whose relief was increased in last October's budget will not be affected by the move - as long as they have bought their home within the last seven years. A spokesman for the Revenue said its records would indicate which homeowners had received mortgage interest relief for less than seven years and payment to these indivuals would not be interrupted
This accounts for about 220,000 of the 562,000 homeloans in the State, the Revenue says.
It has already determined that mortgages on 57,000 properties around the State will definitiely no longer be entitled to the relief from Friday. And the owners of as many as 230,000 other homes will also lose their relief - at least until Revenue can be assured that they are entitled to it.
Revenue officials said today that those people entitled to relief would have the backdated sums credited to their accounts once the exercise was completed.
It expects to begin issuing letters from May 11th. Homeowners will be able to provide the necessary details on a dedicated website the Revenue will have put in place by that stage or by letter.
A Revenue spokesman tonight said it was expected that some people would resume tax relief at source in June but others could face a longer wait.
Banks and building societies deduct the tax relief at source in agreement with the Revenue. However, from Friday, it will not sanctions such deductions unless it is happy that the loans involved meet the tighter criteria for mortgage interest relief.
A spokesman for the Revenue said it had been in discussions with the Irish Banking Federation and has met lenders to see how they could get the informaiton required without writing to individual mortgage holders.
However, in the cases of somewhere between 118,000 and 232,000, Revenue officers believe they will have to issue letters.
It is unclear tonight if lenders will make provision in the short-term for borrowers who find themselves in financial difficulty because of the Revenue clampdown.
