Wednesday, 1 May 2013

Questions (83)

Seán Fleming


83. Deputy Sean Fleming asked the Minister for Finance if cohabiting partners can share their tax credit and tax bands in order that a cohabiting couple will not be disadvantaged in comparison to the civil solidarity pact available in France or other countries where a cohabiting couple can file joint assessment for taxes in the same manner as married couples; and if he will make a statement on the matter. [20604/13]

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Written answers (Question to Finance)

The position is that current tax legislation does not recognise civil solidarity pacts such as are available in France or other countries. Where a couple is cohabiting rather than married or in a civil partnership they are treated as separate and unconnected individuals for the purpose of income tax. Each partner is a separate entity for tax purposes and, therefore, cohabiting couples cannot file joint assessment tax returns or share their tax credits and tax bands in the same manner as married couples. The basis for the current tax treatment of married couples derives from the Supreme Court decision in Murphy vs. Attorney general (1980), which held that it was contrary to the Constitution for a married couple, both of whom are working, to pay more tax than two single people living together and having the same income.

However, a cohabiting couple where both partners are working get, in total, the same tax credits as a married couple or couple in a civil partnership (i.e. €3,300). In addition, the same amount of income is subject to tax at the 20% rate (i.e. €32,800 each). This equates to the €65,600 threshold in the case of a married couple or couple in a civil partnership.

If both cohabitants earn in excess of the standard rate band (i.e. €32,800), then they both pay tax at 41% on any income in excess of €32,800. Married couples or couples in a civil partnership where both work get the same treatment.

The difference between the two groups is the ability of married couples or civil partners to transfer certain tax credits such as the personal/married credits and part of the tax bands, i.e. the tax band of €65,600 available to married couples or couples in a civil partnership with two incomes in 2013 is transferable between spouses up to a maximum of €41,800. This is of benefit where one of the individuals earns less than the 20% tax threshold of €32,800 or where one of the individuals has no income.