Spouses who are actively engaged in a commercial partnership, including the operation of a farm, as opposed to simply being the joint owners of a property, are treated as individual self-employed contributors and are thus liable to social insurance contributions. Spouses who operate in a commercial partnership may be brought into the social insurance system, subject to certain criteria. In this way, both spouses incur a liability to pay self-employed PRSI, and build up entitlement towards a contributory state pension and other social welfare benefits.
On foot of a Programme for Government commitment an information leaflet, ‘ Working with your spouse: how it affects your social welfare contributions and entitlements’, has been developed between the Department of Social & Family Affairs and the Revenue Commissioners to set out the social welfare and tax implications of families co-working in a shared business. It was published on the 25th of June, 2008. To date, more than one thousand applications for commercial partnership status have been received. Of these, 579 applications have been finalised, of which 508 cases are approved.
To qualify for a State Pension (Contributory), a number of conditions must be satisfied.
A person must have at least 260 paid social insurance contributions
have a yearly average of at least 10 contributions paid or credited since entry into social insurance,
must have entered into social insurance before attaining the age of 56 years.
In addition, Section 110 (1) of the Social Welfare (Consolidation) Act of 2005 provides that a self-employed contributor shall not be regarded as satisfying the qualifying conditions for State Pension Contributory unless:
the person has paid self-employment contributions in respect of at least one contribution year before attaining pensionable age (66),
and
all self-employment contributions payable by him or her have been paid.
It is open to any person to apply for recognition of a commercial partnership. However, to be eligible for State Pension, the legislation stipulates that at least 52 self-employment contributions must be paid by a person before they reach 66 years of age. Contributions paid by a pension applicant's spouse do not satisfy this condition.
Following a review of these pension claims, it was discovered that a number of individuals who had been in receipt of pension did not satisfy the condition whereby they were required to have paid at least one year's self-employment contribution before reaching age 66. As they did not satisfy this condition, the claims were disallowed, from the date of pension award, and the customers notified.
Overpayments will be determined in the above cases and the customers will be notified and requested to repay the amounts involved. However a Recovery Officer may reduce or cancel an overpayment based on the circumstances of an individual case, in line with the governing legislation.
It should be noted that while the publication of the leaflet ‘ Working with your spouse: how it affects your social welfare contributions and entitlements’ clarified existing procedures in relation to the recognition of commercial partnerships between husbands and wives for social insurance purposes, including retrospective payment of social insurance, it did not involve a change in existing policy or administration. In particular, the clarification of the position did not alter people’s potential entitlements and all applicants for the state pension (contributory) must continue to satisfy the eligibility conditions as contained in legislation, and outlined above.
The department understands and apologises for the upset and distress caused to these people and regrets the administrative error involved.
