€3m tax cost for every 1,000 same-sex civil partnerships

THE MAXIMUM cost to the exchequer of extending marriage-like income tax benefits to same-sex civil partners is likely to be €3 million for every 1,000 couples, according to calculations by Government officials.

Latest figures show that 614 civil partnerships have either been registered or are due to be registered this year since the system was introduced at the beginning of the year.

Legislation being finalised in the Dáil this week allows registered civil partners to avail of the same tax benefits in areas such as income tax, stamp duty, capital acquisitions tax, capital gains tax and VAT.

The Finance (No 3 Bill) also allows for a redress scheme for opposite-sex and same-sex cohabiting couples in the event of the break-up of their relationships.

In a statement, the Department of Finance said the €3 million estimate for the cost of extending income tax benefits to civil partners is the maximum cost and, in reality, is likely to be much less.

The exchequer, however, could stand to lose out on more tax revenue when changes to stamp duty and other taxes are factored in.

For example, transfers of property between civil partners will now qualify for the same exemption from stamp duty as is given to married couples.

The department said it was not possible to predict how many transfers of property between civil partners might occur in a year, or how much this property would be worth. However, an official said that, like income tax costs, it was likely to be “comparatively low”.

The legislation also has implications for cohabiting couples – both same-sex and opposite-sex – who choose not to get married or register a civil partnership.

While the legislation provides these cohabiting couples with a new redress scheme in the event of death or a break-up in the relationship, it does not give them marriage-like income tax privileges.

As a result, cohabiting couples will continue to be taxed as single people, and unused credits and standard rate bands cannot be transferred between cohabitants.

The redress scheme is aimed at providing legal protection for long-term cohabiting couples and provides safeguards for an economically dependent cohabitant.

This involves a number of tax changes. For example, where one of the former cohabitants is granted redress by the courts through the transfer of property, the legislation means this transaction will not now be liable to stamp duty.

It will also mean the donor of the property will not have a capital gains tax liability on the transfer of that property.

Previously, the former cohabiting couple would have been deemed as unconnected and subject to full capital acquisitions tax, stamp duty and capital gains tax.

The legislation also provides for income tax relief for maintenance payments made to a financially dependent former cohabitant as ordered by the courts.

The changes introduced under the legislation will be effective for the year of assessment for 2011 and subsequent years.

For example, if a civil partnership was registered in April 2011 the couple will be considered for civil partnership income tax treatment from the date of the registration of the civil partnership and not from the date of the enactment of this Bill. This is in line with the position of people getting married.

In the case of inheritance, gift tax or stamp duty reliefs for a civil partnership that was registered in April 2011, the entire annual relief will apply and not just an apportionment from the date of the civil partnership or from the enactment of the Bill, according to the Department of Finance.

The legislation is scheduled to be heard at committee stage in the Dáil this week and is likely to be enacted shortly.