For the purposes of capital acquisitions tax (CAT), the relationship between the person who provides a gift or inheritance (the disponer) and the person who receives it (the beneficiary) determines the tax-free threshold (Group Threshold) below which CAT does not arise. Any prior gift or inheritance received by a person since 5 December 1991 from within the same Group Threshold is aggregated for the purposes of determining whether any CAT is payable on a benefit. Where a person receives gifts or inheritances that are in excess of the relevant Group Threshold, CAT at a rate of 33% applies on the excess. There are three Group thresholds:
- the Group A threshold (currently €335,000) applies, inter alia, where the beneficiary is a child (including certain foster children) of the disponer;
- the Group B threshold (currently €32,500) applies where the beneficiary is a brother, sister, nephew, niece or lineal ancestor or lineal descendant of the disponer;
- the Group C threshold (currently €16,250) applies in all other cases.
In the case of long-term cohabitants who are not related to each other, the relevant Group Threshold is the Group C threshold, which is €16,250. However, an exemption from CAT may be available in relation to certain gifts and inheritances between long-term cohabitants.
Firstly, where a cohabitant inherits the family home from his or her deceased partner, he or she may be in a position to avail of the dwelling house exemption. To qualify for the exemption, the inherited property must have been the deceased cohabitant’s principal private residence at the date of his or her death. This requirement is relaxed in situations where the deceased person left the property before the date of death due to ill health; for example, to live in a nursing home. The inheriting cohabitant must also have lived in the house for 3 years prior to the date of the inheritance and must continue to live in the house for 6 years after that date. In addition, the inheriting cohabitant must not have a beneficial interest in another residential property. Detailed guidance on the dwelling house exemption has been published on the Revenue website at: www.revenue.ie/en/tax-professionals/tdm/capital-acquisitions-tax/cat-part24.pdf
Secondly, gifts and inheritances taken by a qualified cohabitant in accordance with a Court Order made under Part 15 of the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010 are exempt from CAT. Part 15 of that Act provides for a redress scheme whereby court orders can be obtained in certain circumstances in relation to the transfer of property. A “qualified cohabitant” is a person who has been in a committed relationship with another person for a minimum period of 5 years (or 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 prior to the end of the relationship.
In relation to the Deputy’s question as to whether I am considering the rights of cohabiting couples to apply to Revenue for a certificate to grant the same tax rights as married couples, it is important to note that differences in the tax treatment of the different categories of couples arise from the objective of dealing with different circumstances while also respecting the constitutional requirement 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. As such, there is no statutory basis on which Revenue could issue the type of certificate the Deputy has referred to.
Further information on the taxation of cohabiting couples has been published on the Revenue website at: www.revenue.ie/en/life-events-and-personal-circumstances/marital-status/cohabiting-couples/index.aspx
