Terence Flanagan
Question:207. Deputy Terence Flanagan asked the Minister for Finance if he will address a matter (details supplied) regarding income; and if he will make a statement on the matter. [8969/15]
View answerTuesday, 3 March 2015
Questions (207)
Written answers
The treatment of maintenance payments for taxation purposes depends on the arrangements in place regarding the payment of the maintenance and also the basis of assessment which is applicable to the couple making the payments. In order to determine if the maintenance is taxable it must be established if the maintenance relates to payments that are legally enforceable or if the payments are on a voluntary basis.
Voluntary maintenance relates to an informal arrangement whereby payments are made on a voluntary basis. As these payments would not be legally enforceable, they are not chargeable as income for taxation purposes in the hands of the recipient.
However, maintenance which is payable under a legally enforceable maintenance agreement, for example payments under a Deed of Separation or Divorce Settlement, is chargeable as income in the hands of the recipient for tax purposes. Sections 1025 (Married persons) and 1031J (civil partners) of the Taxes Consolidation Act 1997 contain the relevant provisions:
1. the person making the payments makes the payments gross;
2. the person making the payments is allowed, in computing his or her total income for tax purposes, a deduction for the maintenance payments made in the year of assessment for the benefit of the other spouse or civil partner;
3. the recipient is taxable in respect of such maintenance payments received; and
4. both individuals are taxed as single persons.
The extent of any tax liability will depend on the amount of the maintenance and on the total income of the individual receiving the maintenance. Only payments made for the benefit of the other spouse or civil partner qualify for tax relief. Payments which are made for the benefit of a child are not regarded as maintenance for the purposes of tax relief.
There is also an alternative basis of assessment available to couples who elect to be assessed to income tax in accordance with sections 1026 (married persons) or 1031K (civil partners) of the Taxes Consolidation Act 1997. This alternative basis of assessment only applies to maintenance arrangements which are legally enforceable and also where a couple have elected jointly for this alternative basis of assessment. In addition:
1. both parties must be resident in the State for tax purposes for the year of assessment; and
2. neither must have entered into another marriage or civil partnership.
Where an election by both parties is made under sections 1026 or 1031K the maintenance payments are ignored for tax purposes; i.e.:
1. the person making the payments gets no deduction for the maintenance payments; and
2. the recipient is not taxable on the maintenance received.
Where the recipient has no other income he or she will, therefore, have no tax liability because the maintenance is ignored for tax purposes.
This and other relevant information in relation to the taxation of married couples and civil partners is available on the Revenue website.