Dáil Éireann debate -
Tuesday, 1 Jul 2003

Vol. 570 No. 2

Written Answers. - Tax Allowances.

Paul McGrath

Question:

224 Mr. P. McGrath asked the Minister for Finance the reason premiums paid on mortgage protection policies on properties which are rented for residential purposes are allowable as an expense against income from 1 January 2002; and the reason this allowance was not allowable prior to this date in view of the fact that facilitating legislation was not invoked to allow this. [18360/03]

Minister for Finance (Mr. McCreevy):

Allowable deductions under the tax law relating to rental income are provided for in section 97(2) of the Taxes Consolidation Act 1997. Section 97(2)(d) authorises a deduction in respect of "the cost of . . . management of the premises borne by the person chargeable and relating to and constituting an expense of the transaction or transactions under which the rents or receipts were received, not being an expense of a capital nature". I am informed by the Revenue Commissioners that in strictness, mortgage protection policy premiums are arguably not part of the cost of management of the premises but relate more to the management of the landlord's financial affairs than to the management of the premises. Such expenditure could also be argued to be capital in nature. However, the Revenue Commissioners recognise that financial institutions insist that such policies are put in place when sanctioning borrowings. Accordingly, Revenue, having reviewed the position, decided to treat mortgage protection policy premiums paid as an allowable deduction in computing rental income for income and corporation tax purposes.

The new treatment was applied from a current date. Thus, mortgage protection policy premiums paid on or after 1 January 2002 will benefit. It is not possible to apply the new treatment retrospectively as this would involve the reopening of thousands of cases already settled. The approach adopted is in line with that adopted in a similar previous ruling where it was decided that accountancy fees incurred in preparing rental income accounts could also be offset against rental income.

John Cregan

Question:

225 Mr. Cregan asked the Minister for Finance if concessions are available on payments of stamp duty in cases of marriage separation whereby houses are being sold as part of a separation agreement and separate house purchases; if a case can be made on hardship or compassionate grounds; and if the income tax treatment of a spouse forced to return to full time work with young children can be outlined and clarified and the allowances listed. [18395/03]

Minister for Finance (Mr. McCreevy):

Stamp duty legislation has no specific provisions in respect of separation agreements whereby the family home is sold and new homes are purchased. However, if one spouse remains in the family home, there is provision, in certain limited circumstances, to extend the first-time buyer relief to the other spouse, if he or she purchases a home. In such circumstances, a person whose marriage is the subject of a decree of judicial separation, a decree of divorce, a decree of nullity or a deed of separation may be treated as a first-time buyer, provided that the person has no interest in the former marital home and the other spouse continues to occupy it as a main residence. The home must also have been occupied by both of them as their main residence prior to the separation. Stamp duty legislation does not provide for relief in cases of hardship or on compassionate grounds.

The income tax treatment of a separated spouse with young children, returning to full-time work will depend on the specific circumstances of each case. However, in general, the individual will be liable to income tax on his or her total income from all sources including any income received under the terms of a deed of separation or maintenance order for the support of the individual. The individual will be treated as a single person and, where he or she is not entitled to the one-parent family tax credit, the following rates of tax will apply: first €28,000 at 20%; and the balance at 42%.

The one-parent family tax credit is an additional tax credit available to a taxpayer that is not entitled to claim the married tax credit, is not living with another individual as man and wife, and has resident with him or her a qualifying child or children at any time during the year. Such an individual may have entitlement to a personal tax credit of €1,520 per annum, a PAYE tax credit of €800 per annum and, where applicable, a one-parent family tax credit of €1,520 per annum. Individuals in receipt of one-parent family tax credit also benefit from an increased tax rate band and are liable to tax as follows: first €32,000 at 20%; and the balance at 42%.

There are provisions in the income tax legislation which allow a separated couple in certain circumstances, to jointly elect for joint assessment for tax purposes. In such a case, any payments received by the spouse under the terms of a deed of separation or maintenance order would not be assessable to tax on that spouse and the spouse making the payment could not claim a tax deduction in respect of the payment.

Persons returning to employment after being unemployed can claim the Revenue job assist allowance where certain conditions are satisfied. The Revenue job assist scheme provides an incentive to both the long-term unemployed to take up employment and employers to employ the long-term unemployed.

The scheme is available to persons who have been continuously unemployed for the immediate period of 52 weeks prior to taking up a qualifying job and in receipt of an unemployment payment – unemployment benefit or unemployment assistance – or the one-parent family payment. Time spent on a number of State-aided training courses or schemes, including FÁS courses or community employment schemes, can be taken into account as periods of unemployment. In 1999, the scheme was extended to include persons in receipt of certain disability payments.

Under the scheme, a qualifying employee may, in addition to his or her normal tax credits, claim an additional tax deduction at the marginal rate of tax for three years after taking up a qualifying employment. The allowance in the first year of employment is €3,810, plus €1,270 for each qualifying child, reducing to two thirds of these amounts in year two and one third in year three. The second part of the scheme provides a double wages deduction and a double PRSI deduction for employers who employ the long-term unemployed.