Capital Acquisitions Tax and unmarried co-habitees

Deputy John Deasy:
31 October 2007
Contribution to Dáil Éireann by John Deasy TD on the Civil Unions Bill, 2006

"I wish to raise an issue that affects not only same sex couples but also unmarried couples. In the last couple of days the Taoiseach and others have spoken about introducing legislation within months to deal with civil partnerships and the issues that go with it. However, people might not be aware that the Finance Act 2007, enacted last February, strips some basic rights under the tax laws from unmarried couples, be they same sex or not. While the Government talks about extending rights, some basic tax rights have been removed in the last nine months.
Section 130 of the Finance Act 2000 provided relief from capital acquisitions tax for many home sharers upon the death of a partner. In his speech on this section in 1999, the then Minister, former Deputy Charles McCreevy, spoke about those in family and personal relationships who, under tax law, are treated as strangers. The section was passed to ensure that when somebody in a long-term but unmarried relationship who suffered the death of their partner and subsequently inherited the family home would not be subject to massive inheritance tax where a will was not made. One can understand the reason for it. It did not provide for equality perhaps but provided some element of fairness for unmarried couples under the tax law.
Speaking on the Finance Bill 2007 the current Minister, Deputy Cowen, said he was introducing a provision to deal with such manufactured situations that came within the scope of a section that was contemplated for a completely different, more bona fide set of circumstances. He tabled the amendment to close off any use of the provision in a manner that was not contemplated originally. He went on to say that he did not discern endemic fraud in this regard. What happened however was a blanket change that affected cohabiting couples. Section 116 of the Finance Act 2007 was passed. It effectively abolished the relief except for reasons of old age or infirmity. Deputy Cowen said the amendment was supposed to address some anomalies but the result was a blanket change in the law.
I have been contacted by a number of solicitors in Waterford about this. They have given me some examples of its effect. Take the example of two people in a long-term relationship where the dwelling house is owned by one of them. If the property owning partner dies leaving the dwelling house to his surviving partner and if the dwelling house was worth €400,000, the tax liability will be €400,000 less €25,000 tax exemption which leaves €375,000 taxed at 20% and amounts to approximately €75,000. That is the difference between being married and unmarried in this country. In this case it is €75,000.

One solicitor told me he contacted the Revenue Commissioners on behalf of a client and was informed there have been numerous complaints about this but that they can do nothing because the law is passed.
The purpose of the amendment to the Finance Act 2007 was to limit the relief and restrain high net worth individuals from abusing the tax code and evading tax. Unwittingly, the amendment did not take account of the different types of human relationships that exist in a modern secular society like ours and the effect a law like this can have on lives. We are talking about extending rights to same sex couples in the areas of tax, social welfare and inheritance, and that is fine, but some of the vital tax rights that were balanced by previous legislation have been taken away within the past eight or nine months.
In the 2006 census there were 2,090 same sex couples in this country and there were more than 121,000 unmarried couples so we should get the proportion correct because that is 11.6% of all family units. I understand the Labour Party's goal for this motion and I support it but it is not the complete picture. We should spare a thought for heterosexual couples that are not being treated fairly under our tax code. If rights are to be extended to same sex couples under civil partnership, unmarried couples must also be dealt with fairly and this should begin with this year's Finance Bill, rather than wait for a Civil Unions Bill in March. If we are to make a practical difference in people's lives, be they in same sex or unmarried couples, we can start with this year's Finance Bill and amend the Finance Act 2007. This would make a practical difference for people facing massive tax bills on inheritances when a will has not been made."

Click to expand...

Starbuck said:

I'm pleased to hear it, if thats so, but why then did the Revenue say 'there have been numerous complaints about this but that they can do nothing because the law is passed'?

Click to expand...