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.
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.
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 email@example.com
The Collector General & the Revenue Commissioners have carried out almost 32,000 enforcement proceedures during 2012 recovering €210m.
The most common enforcement type was the appointment of County & City Sheriffs to collect debt amounting to almost €150m. This occurred on over 22,000 occasions.
Sheriffs fees can be in the region of 2% of the debt – resulting in an additional €3m in fees paid by the hard pressed tax payers.
Not bad work if you can get it!
The report of the Comptroller and Auditor General for 2011 has been published. In relation to tax and Revenue it includes a number of interesting points:
• Income tax receipts increased by a net €2.5 billion (bn) in 2011 when compared with 2010, reflecting the introduction of the Universal Social Charge (USC) and the reduction in tax bands and credits.
• Tax forecasting has been made more difficult with the emergence of significant corporation tax losses. The utilisation of losses in 2010 is estimated to have reduced potential corporation tax receipts by €2.75bn.
• A new debt analysis tool was introduced on a pilot basis in February to allow Revenue case workers prioritise the recovery of debt by reference to the age of the debt. It also allows them to determine the type and timing of interventions to maximise recovery.
• Total tax outstanding at the end of March 2012 was just under €2bn. The two largest categories of debt outstanding are income tax and VAT. Overall, about one third of the debt outstanding was under appeal.
• 3 economic sectors accounted for 59% of the total tax written off in 2011; construction, wholesale and retail trade and accommodation and food services. The majority of these write offs arose due to liquidations and the trade ceasing with insufficient liquid assets
Thanks to the Institute of Tax for the above summary.
Revenue has announced that they have appointed Michael Gladney as the new Collector-General. Mr Gladney headed up Revenue’s Limerick Tax District & South West Region’s Large Enterprise Audit Unit, prior to his appointment as Collector-General.
The previous Collector-General, Gerry Harrahill has been assigned as head of Revenue’s Corporate Affairs and Customs Division
Since its introduction in 2004, the research and development (“R&D”) tax credit has been improved and extended. Since 2009, cash refunds of unused R&D credits can be claimed. Finance Act 2012 has further improvements, including rewarding some staff by transferring R&D credits to them to claim income tax relief. A recent survey suggests fewer than 20% of Irish companies have made claims, so many companies must be missing out on this valuable relief. As defined, R&D is much broader than many realise, and covers far more than white- coated technicians in labs. Consider its potential application to your company, particularly if a cash refund is possible.
Expenditure that qualifies
Certain criteria must be met to be “qualifying activities” for the R&D credit, including the areas of science and technology where work was carried out. In some areas, R&D activity is obvious (e.g. pharmaceuticals) but software development, engineering, food production, health and agriculture are other areas where relief may be available. Companies often underestimate the categories of qualifying R&D expenditure. In addition to direct R&D costs, indirect expenses (support staff wages, rent, and many others) can be included by reasonable apportionment.
If it meets the conditions, a company can claim a corporation tax credit equal to 25% of its “incremental” expenditure on qualifying R&D activities over the “base year” spending level. The R&D credit is in addition to the “normal” 12.5% deduction. The incremental qualifying expenditure may be capital (a new building or machine) or revenue (salaries, materials) in nature, with direct and indirect expenditure qualifying. Grant-aided expenditure does not qualify. The activities need not be carried out in Ireland. Though aimed mainly at in-house R&D activity, sub-contracted work can qualify, subject to monetary limits.
Method of claiming credit
The claim is included in the corporation tax return, Form CT1. While no supporting documentation is needed on making a claim, it should be in place as Revenue often audit R&D claims, particularly where cash refunds of unused R&D credits arise.
Time limit for claims
Claims must be made within one year of the end of the accounting period in which the R&D expenditure was incurred. Any R&D tax credit not claimed by then is lost.