Married couples living together may opt for joint assessment where they may transfer unused credits and bands between spouses, subject to certain restrictions. The restrictions relate to the employee credit which is allocated on an individual basis and is non-transferable and to transferability of the standard rate band for a married couple which is limited to €37,000. The majority of married couples opt for joint assessment because the transferability between them means it can be more advantageous to them than treatment as two single persons. Within joint assessment, a married couple may opt for separate assessment. Under this option they will be treated as single persons but their combined tax bill will be the same as under joint assessment. Couples may also elect for assessment as single persons where each spouse is taxed on his or her own income, each receives the credits and the standard band due to a single person and there is no transferability of unused credits and bands. As regards other taxes, a spouse may receive gifts and inheritances from the other spouse without paying capital acquisitions tax, CAT. There are also certain exemptions for married couples in the capital gains tax and stamp duty codes.
Generally speaking, the tax system treats members of co-habiting couples as separate and unconnected individuals. Each partner is a separate entity for tax purposes and credits, bands and reliefs cannot be transferred from one partner to the other. The home carer's credit may not be claimed by cohabiting couples as the credit is restricted to married persons who are jointly assessed for tax. It should be noted that a man and woman living together as man and wife are specifically excluded by the tax code from entitlement to the one-parent family tax credit.
For CAT purposes, the members of co-habiting couples are treated as unrelated. However, within a couple, an individual may be able to avail of dwelling house relief. Essentially, CAT no longer applies on the transfer of the home on or after 1 December 1999 provided it is the principal private residence of the disponer and-or the recipient and the recipient has been living in the home for the three years prior to the transfer. The recipient must not have an interest in any other residential property. It is also a condition of the relief that the recipient must own and reside in the house for six years after the transfer. However, this condition does not apply to recipients over 55 years of age and provision is made also for those circumstances where the recipient is unable to comply with the residence requirement for reasons outside his or her control, for example, due to hospitalisation or work obligations.
The working group examining the treatment of married, co-habiting and one-parent families under the tax and social welfare codes, which reported in August 1999, was sympathetic in principle to changes in the tax legislation to address the issues raised relating to co-habiting couples and reported that the options that it set out should be considered further. However, it acknowledged with regard to the tax treatment of co-habiting couples that a key issue is whether tax law should proceed ahead of changes in the general law. Earlier this year, in response to a parliamentary question, my predecessor indicated to the Deputy that such a course, where changes in the tax code would set a headline in advance of developments in other relevant areas of public policy, for example, in the area of legal recognition of relationships other than married relationships, would be problematic and unwise. I agree with that position.
However, I draw the Deputy's attention to the consultation paper on the rights and duties of co-habitees which was published in April this year by the Law Reform Commission. That paper indicated that in the light of the current policy with regard to individualisation of the tax bands, the commission was not recommending any change to the income tax treatment of co-habiting couples. It has been the practice of successive Ministers for Finance not to comment in the run up to the annual budget and Finance Bill on what may or may not be included in that process and I do not intend to depart from that practice.