John Perry (Sligo-North Leitrim, Fine Gael) | Oireachtas source

The one-parent family tax credit was reformed and replaced with a new single person child carer credit from 1 January. While the single person child carer credit is of the same value, that is, €1,650, as the earlier tax credit and also carries the same entitlement to the extended standard rate tax band of €36,800 per annum, the new credit is targeted such that it is available only to the claimant who is the principal carer of the child, that is, the individual with whom the child resides and who looks after the child for the year or the greater part of the year. A maximum of one credit is available per single carer-claimant, regardless of whether he or she cares for more than one child.

Given the difficult fiscal environment, it is essential that all tax reliefs, credits and incentives are kept under review to ensure they are properly targeted and, if necessary, refocused in order that they might achieve the socioeconomic objectives set for them. The one-parent family tax credit was, in certain cases, being claimed by multiple individuals in respect of a single child. A system that allows multiple claims in respect of the same child is unsustainable in the current budgetary circumstances.

It is important to point out that this new credit has been designed to work as an activation measure and to be an in-work benefit to support the primary carer to take up or remain in employment. It will assist single parents or carers with the cost of child care.

In addition, it should be noted that this new policy has been agreed by Government based on a recommendation put forward by the Commission on Taxation that the tax credit should be retained but that it should be confined to the principal carer only. The Government is satisfied that the restructuring of the credit will achieve such an outcome.

In the first instance, it is the responsibility of the parents to look after a child, including financially. Tax credits should not be considered a supplementary source of income, or an alternative to the financial support of a parent.

It is worth pointing out that where a principal carer is married, in a civil partnership or cohabiting they would not be entitled to the new credit, or the former one. In such circumstances the principal carer cannot relinquish the credit to a secondary carer. In addition, a secondary claimant who is married, in a civil partnership or cohabiting would not be entitled to the new credit, or the former one, regardless of the marital status of the primary carer.

The allocation of child care responsibilities is primarily for parents to agree. However, having listened carefully to the views expressed by colleagues in both Houses, the Minister brought forward an amendment on Committee Stage, such that a principal carer who is entitled to the credit and who does not wish to avail of it can choose to surrender it. A secondary claimant may then make a claim for the credit, provided that the qualifying child resides with him or her for not less than 100 days in the tax year. It is entirely appropriate that such surrendering of the credit should be evidenced in writing. This allows for certainty for the full duration of the tax year - this may be the point on which the Senator was seeking clarification - and caters for situations where a principal carer expects to have no tax liability, is actively seeking work, or simply wishes to relinquish the credit despite having the requisite income to utilise it.

The single person child carer credit is initially granted to the principal carer and it is only in circumstances where that individual chooses to relinquish his or her claim that a secondary claimant can then make a claim for the credit. The procedure for relinquishment is that the principal carer proves entitlement to the credit in the first instance and then notifies the Revenue Commissioners, using the same approved form, that he or she wishes to relinquish or surrender this entitlement. It is only in the event of such a relinquishment or surrender that a secondary claimant can then make a written claim to the Revenue Commissioners for the credit. Rather than requiring the second parent to get permission from the first to claim the credit, the legislation requires the first parent to notify Revenue of his or her intention to surrender the credit. That detail clarifies the point. Once the credit has been awarded to a secondary claimant, it will remain with that secondary claimant until such time as the primary claimant wishes to re-enter a claim for the credit. In such circumstances the credit will only be restored to the primary claimant from the start of the next tax year where a formal claim for reinstatement of the credit is made before the end of the current tax year.

In the situation where a principal carer is unwilling to relinquish the credit, it would not be possible to easily identify a secondary claimant, who could be a grandparent, parent or sibling, any one of whom might present a claim to the credit. In addition, a primary claimant could be awaiting a change in his or her employment status before claiming the credit, and as a result, may not want to give it up.

To allow the credit to a secondary claimant without it being surrendered voluntarily by a principal carer could reveal information about the financial or civil status of the principal carer and therefore be in breach of confidentiality. I trust the reply, while is quite technical, has clarified some of the points the Senator raised.