Tax treatment for Seperated / Divorced Couples

[droileen]

Does anyone have experience of :-

(a) where a couple are seperated and only 1 is working - paying maintainence to the other - & using the full married allowance ?

(b) where a couple are seperated with a legal agreement & only 1 is working - paying maintainence to the other - & using the full married allowance ?

(c) where a couple are divorced (now both single) & only 1 is working - paying maintainence to the other - & using the full married allowance ?

(d) where a couple are divorced (one single, the other re-married) & only 1 is working, paying maintainence to the other - & using the full married allowance (his new wife is continuing to use her own single allowance )

In none of the above scenearios is there a written consent from one of the seperated with the other - consenting to his using the married allowance. The monthly maintenaince is paid free of tax & prsi deduction from one to the other.

I know my situation is a complete mess & I was wondering how best to go about sorting it out. I have not been in touch with the Revenue at all but I think they know I am divorced, through social welfare claims.

I have not done a tax return for about 10/15 years. I am on PAYE.

 

[ClubMan]

I have not been in touch with the Revenue at all but I think they know I am divorced, through social welfare claims.

SW would not necessarily share information about claims with Revenue.

I have not done a tax return for about 10/15 years. I am on PAYE.

Note that PAYE workers are not obliged to do annual returns but they are responsible for ensuring that their tax affairs are kept up to date.

Perhaps you need professional advice? If you cannot afford this then at least talk to CitizensInformation who may be able to put you on the right track.

 

[Taximan]

You really need to get professional advice, this area has obliviously become a huge growth area for tax specialists, and while not hugely complex there are a lot of tax benefits that can be missed if not handled correctly.

You also have to realise there is not just income tax implications here but also CGT and CAT & SD, mortgage interest relief, allowances.

Some of the basic points are as follows:
You can use maintenance payments as an offset against your gross income if you have a Legal separation or divorced (but not if just separated you must be legally separated). This payment will then be taxed in the hands of the recipient. Very large benefit if you are saying a marginal rate payer and the other spouse is a standard rate payer.

Payments to children no allowances, so you increase payment to spouse to account for children thereby receiving tax benefit.

No CGT between spouses but if assets are passed under a legal separation or divorce there will be no CGT otherwise afterwards there will be. So this is why you will see the t/F of assets such as houses at this time.

I am by no means a specialist in this area but I do know there are significant tax savings to be made if handled correctly so take professional advice you will get a list of tax specialists in your area on the AITI website.