SELECT COMMITTEE ON FINANCE, PUBLIC EXPENDITURE AND REFORM debate -
Thursday, 30 Jun 2011

Finance (No. 3) Bill 2011: Committee Stage

Chairman

I welcome the Minister for Finance, Deputy Michael Noonan, and his officials this afternoon. On my own behalf and, I am sure, on behalf of the committee, I congratulate Deputy Noonan on his elevation to the position of Minister for Finance. I look forward to a productive relationship with the Minister and his Department in the course of the life of this committee.

The purpose of this meeting is to consider the Finance (No. 3) Bill, 2011. The Bill was referred to the select committee by Dáil Éireann on 22 June last.

SECTION 1

Question proposed: "That section 1 stand part of the Bill."

Chairman

Is the section agreed?

Deputies

Agreed.

Minister for Finance (Deputy Michael Noonan)

Would the Chairman like to hear my speaking note on it?

Chairman

Yes, if the Minister so wishes.

Deputy Michael Noonan

This section, and the related Schedule 1, deal primarily with the income tax treatment of civil partners and the various assessment options available to them. These options are joint assessment, separate assessment or separate treatment. In the absence of an election to the contrary, a couple is deemed to have elected for joint assessment. Under joint assessment one civil partner is chargeable to tax, not alone on his or her own total income, but also on the total income of the other civil partner. The civil partner who is chargeable to tax on the income of both individuals is known as the "nominated civil partner".

Under separate assessment each civil partner is assessed on his or her own income with allowances and reliefs divided between the civil partners. Separate assessment is also known as "separate assessment within joint assessment" as one civil partner's unused allowances, reliefs and rate bands may be transferred to the other civil partner. Under separate treatment each civil partner is treated for tax purposes as if they continue to be single.

This section also deals with maintenance provisions for civil partners living apart, for the adaptation of certain provisions to allow for the joint assessment of civil partners living apart or whose partnership has been dissolved or annulled. Also addressed in this section is the assessment of civil partners for capital gains tax purposes. It sets out the method of joint assessment, provides for applications for separate assessment and provides rules for the transfer between civil partners of unutilised capital losses. These provisions follow the practices and entitlements for married couples.

Finally, this section deals with the income tax treatment of a cohabitant in respect of maintenance payments from a former partner where the relationship has ended. In such cases the person paying the maintenance will get income tax relief in respect of the payment. The person receiving the payment will, in turn, be liable to income tax in respect of the payment. This mirrors in some respects the income tax treatment of married couples and civil partners. The section also sets out capital gains tax rules regarding the transfer of assets between persons where the cohabiting relationship has ended.

Schedule 1 contains 253 separate technical amendments to the Taxes Consolidation Act 1997 to extend existing tax legislation to cater for civil partnership. These amendments cover a broad range of taxation issues including pensions, savings, mortgage interest, health insurance, benefit-in-kind, business investment, close company provisions, capital gains tax, self-assessment and filing of tax returns among others. Section 1 and Schedule 1 contain provisions to mirror the way tax code applies to married couples for persons in civil partnership and there are no other changes.

I wish to advise the committee that I am considering an amendment to this section on Report Stage. It will be a technical amendment ensuring that communications with Revenue by civil partners regarding joint assessment can be made electronically. The Bill does not provide for electronic communications so that is the only change. We can make the change on Report Stage.

Chairman

Thank you, Minister.

Question put and agreed to.

SECTION 2

Question proposed: "That section 2 stand part of the Bill."

Chairman

Is the section agreed?

Deputy Michael Noonan

Again, I would like to read my note. This section and the related Schedule 2 give effect to the changes necessary to the Stamp Duties Consolidation Act 1999. In future, transfers of property between civil partners will be free of stamp duty in the same way as a transfer between a married couple.

The section also inserts a new section into the Stamp Duties Consolidation Act 1999 to provide that stamp duty shall not be chargeable on an instrument executed after 1 January 2011 where property is being transferred on foot of a property adjustment order made following the break-up of a cohabiting relationship under section 174 of the Civil Partnership Act 2010.

I am considering an amendment to this section on Report Stage. It is a technical amendment and corrects a typographical error.

Deputy Pearse Doherty

I agree with the section. Can the Minister explain the rationale behind the transfer order on 1 January?

Deputy Michael Noonan

The primary legislation, if we may call it that, was introduced around the time of the Finance (No. 1) Bill in January. Subsequently, people availed of the provisions to establish legal civil partnerships. We are taking it back to 1 January for tax purposes in the same way as when a couple marry in April and their tax reliefs go back to the full calendar year. It is to mirror that. Capital tax is for the full year but income tax commences from the date of the partnership or marriage.

Deputy Pearse Doherty

It is in relation to stamp duty and a transfer order. Is it that to which the Minister referred earlier?

Deputy Michael Noonan

Yes, the same as on the capital side.

Question put and agreed to.

SECTION 3

Question proposed: "That section 3 stand part of the Bill."

Deputy Michael Noonan

The section and its related Schedule 3 gives effect to the changes necessary to the Capital Acquisitions Tax Consolidation Act 2003 which will mean that the same CAT reliefs and thresholds available to married couples will now also be available to civil partners. Likewise, children of a civil partner, including children of the other civil partner, will be entitled to the same CAT thresholds as children of married persons.

The section also provides for an exemption from gift and inheritance tax in respect of assets transferred as a result of a court order made under section 175 of the Civil Partnership Act when a cohabiting relationship ends. As a result an asset transferred on the cessation of a relationship, where ordered by the courts, will not give rise to a tax charge for the beneficiary of the transfer.

I propose to bring forward an amendment on Report Stage to extend the exemption from CAT under this section and Schedule 3 to court orders under Part 15 of the Civil Partnership Act, so that CAT exemption will apply to all redress orders.

Question put and agreed to.

SECTION 4

Question proposed: "That section 4 stand part of the Bill."

Deputy Michael Noonan

This section, and the related Schedule 4, give effect to a single change necessary to the Value-Added Tax Consolidation Act 2010. The change relates to the option to tax letting of immovable goods, by extending the definition of "connected persons" to include the civil partner of an individual and the civil partner of a relative of the individual or his or her civil partner.

Question put and agreed to.

SECTION 5

Question proposed: "That section 5 stand part of the Bill."

Deputy Michael Noonan

This section contains provisions relating to the short Title, construction and commencement of the Bill and is self-explanatory.

When the Bill becomes law on being signed by the President, it is provided that the provisions of the Bill become effective as on and from 1 January 2011, the commencement date of the current tax year. Where provisions have effect from the date of passing of this Act they have been listed separately.

Deputy Stephen Donnelly

I have a question on the net effect on all of the sections.

Chairman

The Deputy could address that when we deal with the Title of the Bill.

Deputy Stephen Donnelly

Yes.

Question put and agreed to.

Schedules 1 to 4, inclusive, agreed to.

TITLE

Question proposed: "That the Title be the title to the Bill."

Deputy Stephen Donnelly

My question is on the net effect of the various changes in taxation, and so on under the sections. It is my understanding that different changes are more positive or more negative for civil partners in recognising them in the new status under taxation. Are there any groups, demographic or type of civil partnership where the net effect of the tax changes would be negative and reduce their net income?

Deputy Michael Noonan

No. There is a misunderstanding about the Bill. The changes apply to persons who have civil partnership arrangements under law. They do not apply to cohabiting couples of either or both sexes. There is a misunderstanding that it extends wider than it does. These are provisions for persons who have entered into civil partnerships.

Deputy Michael McGrath

Do we have information on how many civil partnerships have been registered so far and the anticipated impact for the Exchequer of all of those partnerships availing of the provisions of the Act in terms of the various taxation headings?

Deputy Michael Noonan

It is estimated that the maximum cost of extending married treatment, under the income tax code, to such couples is just over €3 million per annum for every 1,000 same sex couples registered. It is more difficult to estimate the cost of extending the treatment in respect of CAT, stamp duty, capital gains tax and VAT because the cost is determined by events or transactions, such as the transfer of property. So far, there are approximately 150 civil partnerships and the estimate for the year is 650.

Deputy Pearse Doherty

Are there any entitlements for tax purposes that married couples obtain that are not extended to civil partners in this legislation? I understand that all of the entitlements have been extended.

Deputy Michael Noonan

There are not any.

Deputy Pearse Doherty

Fine.

Deputy Michael Noonan

I thank the Members of the committee for their support for the Bill. I think we all appreciate that this is important legislation. It effectively gives registered civil partners the same rights, under tax law, as married couples and I think we all agree that this is appropriate and a good thing.

I am confident also, given the support received from all sides of the House, that the Bill will be enacted before the summer recess. Registered civil partners will then be able to avail of the same taxation rights and benefits afforded to married couples. I thank everyone for their co-operation.

Deputy Pearse Doherty

I welcome the fact that the Bill has passed Committee Stage. It is very good and progressive legislation. I thank the Minister and the Government for bringing the legislation forward as soon as possible. I urge the Minister, since this is the first time he has come before the committee, to endeavour to achieve the same consensus when he introduces his next Finance Bill, an impossible task no doubt. I ask him to try and I will try to meet him half way.

Deputy Olivia Mitchell

Is that a promise?

Question put and agreed to.

Chairman

I, too, thank the Minister and his officials for attending this afternoon.