Dáil Éireann Debate, Tuesday - 25 May 2021
181. Deputy Mary Butler asked the Minister for Finance the position regarding the official State recognition of partners who have been long-term co-habiters but are not yet married; the position regarding financial assistance and tax credits available to a person in such a situation upon the death of a partner prior to marriage; his plans to examine the issue further; and if he will make a statement on the matter. [27530/21]
View answerIn situations 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. Because they are treated separately for tax purposes, credits, tax bands and reliefs cannot be transferred from one partner to the other.
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 tax system in Ireland does not treat cohabiting couples the same as married couples or civil partners. Tax legislation provides that cohabiting couples are assessed as single individuals and each cohabiting partner will be entitled to the basic personal tax credit of €1,650.
There are no tax credits or reliefs available to a surviving cohabitant on or following the bereavement of a partner. However, a surviving cohabitant may be entitled to claim the Single Person Child Carer Credit (currently €1,650) if:
1. a qualifying child resides with her or him for the whole or greater part of a year of assessment; and
2. she or he is not jointly assessed for tax as a married person or civil partner, living with her or his spouse or civil partner, or cohabiting with a partner.
A qualifying child is:
- a child who was born in the tax year;
- a child who was under the age of 18 at the start of the tax year;
- a child who was over the age of 18 at the start of the tax year if she or he is either in full-time education or is permanently incapacitated by reason of mental or physical infirmity from maintaining herself or himself; or
- an individual who is over the age of 21 if she or he is permanently incapacitated, having become permanently incapacitated before reaching the age of 21 or whilst in full-time education.
Further information on the Single Person Child Carer Credit can be found on Revenue’s website, available here.
Another tax credit available to co-habiting couples in certain circumstances is the Incapacitated Child Tax Credit, which is currently €3,300. The requirement for relief for this tax credit is that a claimant has custody of and maintains an incapacitated child. The claimant is entitled to the same tax credit in respect of the child as if the child were a child of the claimant. The credit can be claimed by a person in respect of a child who is permanently incapacitated either physically or mentally from maintaining herself or himself and had become so before reaching 21 years of age or finishing full-time education. More information about this credit is available on Revenue's website here.
A further measure of tax relief is also available to cohabitants where a cohabiting relationship ends. To qualify for the particular relief the partners must be “qualified cohabitants”. The Civil Partnership and Certain Rights and Obligations of Cohabitants (CPCROC) Act 2010 defines qualified cohabitants as persons who have been in a committed and loving relationship with another person for a minimum period of 5 years (2 years where they are parents of one or more dependent children), whose relationship has ended due to death or separation and neither of whom was married to and living with another person in 4 of the 5 years immediately before the end of the relationship.
If the relationship ends, and one partner successfully applies for financial redress under section 173 CPCROC Act 2010, tax relief may be available in respect of payments made for the support of a former dependent partner. Relief may only be claimed in respect of legally enforceable arrangements made under section 175 CPCROC Act 2010. The tax treatment is broadly similar to that of separated spouses or former civil partners.
A claim for tax relief for maintenance payments to a former cohabitant is subject to the following conditions:
- the individual making the payments (payer) is not entitled to deduct or retain out of the payment any amount representing income tax on the payment;
- the payer is allowed, in computing her or his total income, a deduction for maintenance payments made in the year of assessment for the benefit of the qualified cohabitant;
- the recipient is taxable under Case IV, Schedule D, in respect of such maintenance payments received; and
- both individuals are taxed as single persons.
Tax relief for maintenance payments will cease if the qualified cohabitant:
- marries or re-marries,
- enters into a recognised foreign marriage,
- enters into a civil partnership (applies on or before 15 November 2015 only), or
- enters into a foreign partnership, which is recognised in Ireland by virtue of section 5 CPCROC Act 2010 (applies on or before 15 May 2016 only).
For the purposes of Capital Acquisitions Tax (CAT), the relationship between the person who provides a gift or inheritance and the person who receives the gift or inheritance determines the lifetime tax-free threshold (the Group Threshold) below which gift and inheritance tax does not arise. Any prior gift or inheritance received by a beneficiary since 5 December 1991 from within the same Group Threshold is aggregated for the purposes of determining whether any tax is payable on a benefit. Where a person receives gifts or inheritances that are in excess of her or his relevant tax-free threshold, CAT at a rate of 33% applies on the excess benefit. In the case of a cohabitant who is not related to the disponer, the relevant tax-free threshold is the Group C threshold, which is currently €16,250.
Cohabiting individuals can avail of the ‘dwelling house exemption’ to bequeath their principal private residence, generally the most substantial asset owned by an individual, free from inheritance tax. This relief is available to people who share a home and meet the conditions of the relief and it is not dependent on the relationship between them. Further details are available at: www.revenue.ie/en/gains-gifts-and-inheritance/cat-exemptions/exemption-for-dwelling-house/index.aspx.
Section 88A Capital Acquisitions Tax Consolidation Act 2003 exempts transfers of property made under court order between qualified cohabitants within the meaning of Part 15 of the CPCROC Act 2010. This is a redress scheme which provides protection in law for long-term cohabiting couples and provides safeguards for an economically dependent cohabitant where a relationship has ended, or on death.
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. 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 tax treatment to couples who have a civil status that is recognised in law. Any change in the tax treatment of cohabiting couples can only be addressed in the broader context of future social and legal policy development in relation to such couples.
