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Tax implications of Civil Partnership & Co-habitation

The Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010 (Act) was signed into law on 19 July 2011. The purpose of the legislation is to extend to registered civil partners the same tax treatment as is currently provided to married couples under the Tax Acts. It was anticipated that the Act would extend a similar tax treatment to cohabitants however the rights of cohabitants with regard to tax legislation have not been significantly increased in this Act.

Civil Partnership

A civil partnership is defined as a same sex relationship similar to a marriage where both parties have entered into a legal agreement under the Act. The Civil Partnership is required to register with the relevant Registrar in order to qualify for favourable tax treatment. Following the registration of the Civil Partnership, civil partners must notify their local Revenue office of the date of registration.

Thereafter the civil partners will be entitled to broadly the same tax treatment as is currently in place for married couples. To that end they will be entitled to the ‘married tax band’ and credits for Income Tax purposes. They will be entitled to transfer assets to each other without triggering Capital Gains Tax and Stamp Duty. Likewise any gift or inheritances made between civil partners will be exempt from Capital Acquisitions Tax.

In the year of registration, both partners will continue to be taxed on a single assessment basis. In subsequent years, the civil partners can elect for joint assessment, separate assessment or separate treatment as appropriate. Where a civil partnership is legally dissolved, Revenue will record the dissolution and each party will be treated as individuals for tax purposes from the date of dissolution.

Cohabitants
A qualifying cohabitant is defined as a person who has lived with another for 2 years or more in the case where they have one or more dependant children and 5 years or more in any other case. As noted above, the Act does not extend the tax treatment of married couples to cohabitants. However under the legislation, a qualifying cohabitant will have the right to seek redress from the courts similar to married couples. For example where a relationship has ended and a qualifying cohabitant can demonstrate that he/she was financial dependant on the other cohabitant the court may order:

1. That property be transferred from one party to another
2. That maintenance be paid
3. That a pension adjustment order be granted
4. That a cohabitant be provided for from the estate of a deceased cohabitant

Those wishing to avoid the effects of the new Act will need to enter into a cohabitants’ agreement.

If you wish to discuss the implications of civil partnership or cohabitation on your personal tax position, do not hesitate to contact Anthony Casey at 01 6766 476 or by email at acasey@noonecasey.ie

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