Dáil Éireann Debate, Wednesday - 24 March 2021
490. Deputy Noel Grealish asked the Minister for Finance his plans to change inheritance tax laws for unmarried long-term cohabiting couples who are currently considered as strangers to give them the same tax status as married couples and those in civil partnerships; and if he will make a statement on the matter. [15386/21]
View answerFor the purposes of Capital Acquisitions Tax, the relationship between the person who provides the gift or inheritance and the person who receives the gift or inheritance determines the lifetime tax-free threshold (the Group Threshold) below which gift or inheritance tax does not arise.
It is a long-held principle of Capital Acquisitions Tax that transfers of assets between spouses are exempt. The spousal exemption from inheritance and gift tax was extended to civil partners from 1 January 2011. A key difference between married couples/civil partners and cohabitants is that the former have a verifiable official confirmation of their status and from a practical perspective, I am advised by Revenue that 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.
As you are aware, where a couple is cohabiting, rather than married or in a civil partnership, each partner is treated for tax purposes as a separate and unconnected individual. Therefore, as you will appreciate, any change in the tax treatment of cohabiting couples in relation to Capital Acquisitions Tax can only be addressed in the broader context of the wider tax system, and future social and legal policy development in relation to such couples.
You should note that there are a number of valuable reliefs and exemptions to Capital Acquisitions Tax, eligibility which are not dependent on the relationship between the disponer and the beneficiary. These include the Dwelling House Exemption, whereby the principal private residence, generally the most substantial asset owned by an individual, can be bequeathed free from inheritance tax. This valuable exemption allows property to be inherited tax-free irrespective of its value where the beneficiary is already living in the house, subject to certain conditions.
In addition, agricultural property and relevant business property of a single individual can also be bequeathed with a significant 90% reduction in their taxable values under the Agricultural Relief and Business Relief schemes where the relevant conditions are met.
In conclusion, the difference in the tax treatment of co-habiting couples is not confined to Capital Acquisitions Tax, and is also a feature of other tax heads, such as income tax. Therefore, any change in the tax treatment of cohabiting couples in respect of inheritance tax could only be addressed in the broader context of the tax system and future social and legal policy development, bearing in mind the current constitutional requirement to protect the institution of marriage.
