Civil Partnerships & Cohabitants
October 2011
Finance (No3) Act was signed into law by President Mary McAleese on 27 July 2011.
The legislation came into effect from 1 January 2011. Registered civil partners are now afforded the same taxation benefits as a married couple (in relation to maintenance, shared home, succession and pensions etc).
This legislation also recognises certain foreign registered relationships for taxation purposes.
A redress scheme for opposite sex cohabitating couples who are not married and same sex cohabitating couples who are not registered in a civil partnership, has also been introduced.
The redress scheme provides for the availability of a similar range of orders that are accessible to a married couple when they separate or divorce (e.g. maintenance orders, property adjustment orders, pension adjustment orders, etc.) There is however no automatic entitlement to get the Orders, rather the cohabitant should apply to the Court for an order to be made.
Couples can also choose to opt out of the redress scheme.
Notably, the legislation does not give opposite sex cohabitating couples or same sex cohabitating couples the same tax treatment as married couples or civil partners.
We have set out hereunder the tax position for registered civil partners and cohabitating couples:
|
Tax Head |
Civil Partners |
Cohabitants |
|
Income Tax |
Can choose the basis of assessment (i.e. single, separate or joint)
Joint assessment will automatically apply unless Revenue are otherwise notified
Ability to transfer unused tax credits and bands to civil partner
May be entitled to a tax refund for the year of registration as civil partners
Tax relief for maintenance payments made by civil partner. The recipient partner will be taxed on the maintenance payment received
Additional tax bands and credits available following the death of one civil partner |
Remain taxed as single individuals
Cannot transfer unused tax credits or tax bands between qualified cohabitants
On the dissolution of a cohabitation arrangement, tax relief is available for the payer of maintenance payments made under a Court order. The recipient will be liable to tax on the amount received
In the event of death of a qualified cohabitant the surviving cohabitant continues to be taxed as a single person |
|
CGT |
Transfers of property between civil partners will not be subject to CGT
CGT losses of one civil partner can be used by the other civil partner (in the same year) if partners are jointly assessed
On dissolution of a civil partnership, no CGT will arise on the transfer of assets under a dissolution order |
Taxed as single persons and any transfer of assets between cohabitants are liable to CGT (currently 25%)
On cessation of a cohabitation arrangement, CGT will not apply to any assets transferred under a Court order |
|
CAT |
Tax exemption for gifts and inheritances between civil partners
Children of one registered civil partner are entitled to the maximum tax free threshold (currently €332,084) for gifts and inheritances received from their parent’s registered civil partner even if that individual is not their biological parent |
Normal gifts and/or inheritances between cohabitants are liable to CAT (currently 25%) Minimum tax free threshold (currently €16,604) applies to gifts/inheritances between cohabitants
Transfers of property, pension benefits or distributions from the deceased’s estate can be exempt from CAT if Court ordered.
|
|
Stamp Duty |
Inter-civil partner transfers of assets are exempt from Stamp Duty |
Transfers of property between cohabitants are liable to Stamp Duty unless the assets are transferred under a Court order in which case no Stamp Duty will apply |
If we can be of any assistance to you in relation to the above, or if you would like a meeting to discuss any aspect of your tax affairs, we would be delighted to hear from you (01 496 5388 or tax@bakertillyrg.ie).
