Hundreds of bank officials face paying thousands in back taxes to the Revenue Commissioners because they were charged the wrong rate of benefit-in-kind (BIK) on investment property loans they received from their employer.

Bank employees are given a lower rate of interest than the general public and must pay BIK on the difference between that preferential rate and rates set by the Revenue Commissioners.

A former banking insider, who now works in private practice, has told the Sunday Tribune that employees of one of the major banks are being charged 5% BIK on preferential loans for second and subsequent properties they purchased even though the correct charge should have been 12.5%.

The confusion arose because only the principle private residence is eligible for mortgage interest relief and therefore subject to the 5% rate. Interest on investment properties is only allowed as a deduction in arriving at the assessable rent from that property.

Loans that qualify for mortgage interest relief are given for the purchase, repair, development or improvement of that property alone.

"A loan used for the purchase of an investment property does not qualify for mortgage interest relief," the Revenue Commissioners states.

The Revenue Commissioners, which are chaired by Josephine Feehily, said that it was not aware of the practice at this stage but said all reports from members of the public are followed up.

"When a 'Good Citizens Report' is received, it is sent to the appropriate district where a suitably experienced officer carefully evaluates it before a decision is made on what action, if any, is to be taken," a spokeswoman for Revenue said.

"Having regard to the provisions of the Revenue customer service charter, the content of the information provided is examined initially to assess its accuracy in the light of the known facts, before any investigation is carried out into the tax affairs or activities of the individual/company who is the subject of the report."