COMPARATIVE TAX TREATMENT OF: REGISTERED CIVIL PARTNERS QUALIFIED COHABITANTS UNDER THE PROPOSALS CONTAINED IN FINANCE (NO.

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1 COMPARATIVE TAX TREATMENT OF: SPOUSES REGISTERED CIVIL PARTNERS QUALIFIED COHABITANTS UNDER THE PROPOSALS CONTAINED IN FINANCE (NO.3) BILL, 2011 Transaction Income Tax Affairs Tax Treatment of Spouses A husband and wife, if living together in a tax year, are entitled to be charged to income tax jointly in one assessment or to be assessed as single persons. Joint assessment is the norm for most married couples who are living together. Proposed Tax Treatment of Registered Civil Partners As with spouses civil partners can be assessed to income tax under single, separate or joint assessment. Proposed Tax Treatment of Qualified Cohabitants Qualified cohabitants are taxed as single persons. Unused tax credits and standard rate band cannot be transferred between them. Income tax reliefs for year of marriage: Income tax reliefs for year of registration as civil partners: The year of marriage relief may be claimed if the aggregate of the income tax paid by both spouses as single persons exceeds the income tax that would have been payable if they had been assessed jointly in respect of their joint total incomes. A refund of income tax may be claimed in the year of registration if the aggregate of the income tax paid by both spouses as single persons exceeds the income tax that would have been payable if they had been assessed jointly on their joint total incomes. 1

2 Transfer of family home (other than on the termination of relationship or on death) No CGT for the spouse transferring his/her interest in the family home to the other spouse. No CAT on the transfer of an interest in the family home between spouses. No CGT for the partner who is transferring an interest in the family home. No CAT for the partner receiving the interest in the family home. The gain on disposal may be exempt from CGT if the cohabitant that is transferring the property can claim principal private residence relief. A gift of an interest in the family home will be liable to CAT. Stamp duty: No stamp duty arises on the transfer between spouses of an interest in the family home. Stamp duty: No stamp duty on the transfer of an interest in the family home to a partner. Stamp Duty applies on the transfer of property between cohabitants. Transfer of other property (other than on the termination of relationship or on death) No CGT for the spouse making the disposal. No CAT for spouse acquiring the property. No CGT on disposal of property to partner. No CAT on the acquisition of property by partner. Any gain on disposal of property is taxable. The beneficiary is liable to CAT on a gift of property. No stamp duty on the transfer of property between spouses. No stamp duty on transfer of property between partners. Stamp Duty applies on the transfer of property between cohabitants. 2

3 Transfer of property on termination of relationship Legally enforceable maintenance payments for the benefit of the other party are deductible for income tax purposes (payments made for children are ignored). Legally enforceable maintenance payments for the benefit of the other party are deductible for income tax purposes (payments made for children are ignored). The person who pays legally enforceable maintenance payments for the benefit of the former partner is entitled to an income tax deduction for the amount of the maintenance paid for the benefit of that party. The recipient will be subject to income tax on maintenance payments made for their benefit. In certain cases, the couple may continue to be jointly assessed for income tax in which case maintenance payments are ignored for income tax. The recipient will be subject to income tax on the payments they receive for their benefit. In certain cases, the civil partners may continue to be jointly assessed for income tax in which case maintenance payments are ignored for income tax. The recipient will be subject to income tax on the payments they receive for their benefit. No CGT for assets transferring on foot of a deed of separation or decree of divorce. No CGT for assets transferring on foot of an order on dissolution of the partnership. No CGT for assets transferring on foot of acourt order for redress granted under the Civil Partnership and Certain Rights and Obligations of Cohabitants Act, No CAT for the beneficiary on transfers received on foot of a deed of separation or decree of divorce. No CAT for the beneficiary on transfers received on dissolution of the partnership (i.e. on foot of an order under Part 12 of the Capital Acquisitions Tax No CAT for the beneficiary on transfers received on foot of a court order for redress granted under the Civil Partnership and Certain Rights and 3

4 Civil Partnership and Certain Rights and Obligations of Cohabitants Act, 2010). Obligations of Cohabitants Act, No stamp duty for assets received on foot of a deed of separation or decree of divorce. No stamp duty for assets received on foot of an order on dissolution of the partnership. No stamp duty for a cohabitant receiving property if received pursuant to a court order under the Civil Partnership and Certain Rights and Obligations of Cohabitants Act, 2010). Death of spouse/ partner/cohabitant The surviving spouse will be entitled to additional tax credits in the year of death and subsequent years. He/she can also avail of a greater standard rate tax band in subsequent years where there are dependent children. The surviving civil partner will be entitled to additional tax credits in the year of death and subsequent years. He/she can also avail of a greater standard rate tax band in subsequent years where there are dependent children. The surviving cohabitant continues to be taxed as a single person. No CGT arises on death. Any assets transferring are deemed to be acquired at market value on the date of death. No CGT arises on death. Assets are treated as transferring at market value. No CGT arises on death. Assets are treated as transferring at market value. 4

5 No CAT arises on assets inherited by the surviving spouse. No CAT for the recipient civil partner. Provided certain conditions are satisfied the inheritance of a dwelling house may be exempt from CAT. Relief from CAT can apply for the beneficiary cohabitant for transfers received on foot of an order under section 175 of the Civil Partnership and Certain Rights and Obligations of Cohabitants Act, 2010). For other inheritances CAT applies on the value of the inheritance over the tax-free amount. No stamp duty arises on the transfer of assets to the surviving spouse. None. Stamp Duty No stamp duty for a cohabitant receiving property from an estate or if pursuant to a Court Order under the Civil Partnership and Certain Rights and Obligations of Cohabitants Act,