A review of the nature proposed by the Deputy is not currently planned as, to the extent that there are differences in the tax treatment of the different categories of couples, such differences arise from the objective of dealing with different types of circumstances while at the same time respecting the constitutional requirements to protect the institution of marriage.
The basis for the current tax treatment of married couples derives from the Supreme Court decision in Murphy vs Attorney General (1980). This decision was based on article 41.3.1 of the Constitution where the State pledges to protect the institution of marriage. The decision 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.
The personal tax credits and standard rate bands available to a married couple or a couple in a civil partnership are therefore equal in value to the personal tax credits and bands available to two individuals, with the difference being that one spouse’s personal tax credit and a portion of his or her standard rate band may be transferred to their spouse if they so choose. This can be of benefit where one spouse has low income or does not work outside the home and therefore does not use their own credit and rate bands in full.
Where a couple is cohabiting, rather than married or in a civil partnership, each partner is treated for the purposes of income tax as a separate and unconnected individual. Each partner is entitled in his or her own right to the tax credits and standard rate band appropriate to a single person, but do not have the option to partially transfer their personal tax credit and/or rate band. Cohabitants do not have the same legal rights and obligations as a married couple or couple in a civil partnership, which is why they are not accorded similar treatment to couples who have a civil status that is recognised in law.
From a practical perspective, it would be very difficult to administer a tax regime for cohabitants which would be the same as that for married couples or civil partners. Married couples and civil partners have a verifiable official confirmation of their status. It would be difficult, intrusive and time-consuming to confirm declarations by individuals that they were actually cohabiting. It would also be difficult to establish when cohabitation started or ceased.
It should also be noted that, while there may be an advantage in tax legislation for a married couple or civil partners as regards the extended rate band and the ability to transfer credits, their legal status has wider consequences from a tax perspective both for the couple and for persons connected with them. To counter tax avoidance, special provisions often apply in respect of transactions between “connected persons” as defined throughout the various Tax Acts. The definition of “connected persons” usually extends to the relatives and children of a taxpayer’s spouse or civil partner. Such provisions would be very difficult to prove and enforce in respect of persons connected with a taxpayer’s cohabiting partner where the couple has no legal recognition of their status as a couple.