Written answers

Tuesday, 28 January 2014

Photo of Róisín ShortallRóisín Shortall (Dublin North West, Independent)
Link to this: Individually | In context | Oireachtas source

198. To ask the Minister for Finance the reason behind the Revenue Commissioners' decision to treat cohabiting couples as single persons; if he will address the discrepancy which arises when persons are denied social protection supports due to their cohabiting income, but are also denied the favourable condition awarded by the Revenue Commissioners to married couples and couples in civil partnerships, such as shared tax credits; and if he will make a statement on the matter. [3825/14]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The position is that where a couple is cohabiting, rather than married or in a civil partnership, they are treated as separate and unconnected individuals for the purposes of income tax.  Each partner is a separate entity for tax purposes and, therefore, cohabiting couples cannot file joint assessment tax returns or share their tax credits and tax bands in the same manner as married couples.

The basis for the current tax treatment of married couples derives from the Supreme Court decision in Murphy vs. Attorney General (1980), which held that it was contrary to the Constitution for a married couple, both of whom are working, to pay more tax than two single people living together and having the same income. 

However, a cohabiting couple where both partners are working get, in total, the same tax credits as a married couple or couple in a civil partnership (i.e. €3,300).  In addition, the same amount of income is subject to tax at the 20% rate (i.e. €32,800 each).  This equates to the €65,600 threshold in the case of a married couple or couple in a civil partnership.

If both cohabitants earn in excess of the standard rate band (i.e. €32,800), then they both pay tax at 41% on any income in excess of €32,800.  Married couples or couples in a civil partnership where both individuals work get the same treatment.

The difference between the two groups in relation to income tax is the ability of married couples or civil partners to transfer certain tax credits such as the personal/married credits and part of the tax bands, i.e. the tax band of €65,600 available to married couples or couples in a civil partnership with two incomes in 2013 is transferable between spouses up to a maximum of €41,800.  This is of benefit where one of the individuals earns less than the 20% tax threshold of €32,800 or where one of the individuals has no income.

The treatment of cohabiting couples for the purposes of social welfare is primarily a matter for the Minister for Social Protection. However, it is also based on the principle that married couples should not be treated less favourably than cohabiting couples.  This was given a constitutional underpinning following the Supreme Court decision in Hyland v Minister for Social Welfare (1989) which ruled that it was unconstitutional for the total income a married couple received in social welfare benefits to be less than the couple would have received if they were unmarried and cohabiting.

Photo of Róisín ShortallRóisín Shortall (Dublin North West, Independent)
Link to this: Individually | In context | Oireachtas source

199. To ask the Minister for Finance the reason the increase between bands one and two of the local property tax is €135, despite the fact the increase between all other bands is €90; and if he will make a statement on the matter. [3826/14]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The Inter-Departmental Group on the design of a local property tax, the Thornhill Group as it was referred to, recommended the creation of a sufficient number of tax bands to allow property owners to place their properties in an appropriate valuation band with reasonable confidence. The Group considered the owners should be able to do so without potentially being exposed to disproportionate risks if they incorrectly positioned their properties by one or even two bands.

The Thornhill Group considered that grouping all except the most expensive properties into valuation bands (with the rate applying at the mid-point of the bands), could ease the valuation challenges. In devising the bands the Group considered that a balance should be struck between the width of the bands and avoiding substantial liability differences between adjacent bands. The wider the band, the easier it would be to carry out a self-assessment; but very wide bands would run the risk of creating inequities between taxpayers as well as compliance challenges.

Taking account of all aspects, the Group recommended a market value based system of self-assessment involving bands of €50,000 in width, for properties valued between €100,001 and €1000,000. The Group specifically recommended that the tax liabilities on properties valued at less than €100,001 would be a basic charge determined by applying the tax rate to the midpoint value of €50,000. For properties valued at more than €1000,000, tax liabilities would be determined on the self-assessed value using the percentage rates applicable to properties with values in excess of that amount.

The Government accepted the recommendations of the Thornhill Group in this regard and I am satisfied that the current system of valuation bands strikes the appropriate balance between ease of assessment and a smooth progression of liabilities between the valuation bands.

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

200. To ask the Minister for Finance the way an entrepreneur can avail of a new capital gains tax incentive, having disposed of an asset to put towards financing of a new business; and if he will make a statement on the matter. [3836/14]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I announced in Budget 2014 a capital gains tax relief for entrepreneurs who reinvest the proceeds from the disposal of assets made on or after 1 January 2010 in certain chargeable business assets. The necessary legislation governing this relief is included in Section 45 of Finance (No 2) Act of 2013. Commencement of the relief is subject to EU state-aid approval.

Subject to EU approval, the relief will apply from 1 January 2014 to individual entrepreneurs:

- Who have made disposals of assets since 1 January 2010 on which they have paid capital gains tax;

- Who invest at least €10,000, in the period from 1 January 2014 to 31 December 2018, in acquiring chargeable business assets that will be used in a new business and

- Who subsequently (after a minimum period of 3 years) dispose of those chargeable business assets at a gain giving rise to a capital gains tax liability.

The relief will be given on the tax due on any chargeable gain arising on the subsequent disposal of the chargeable assets after a minimum period of 3 years and will amount to the lower of:

- the full amount of capital gains tax paid on the initial disposal made since 1 January 2010 or

- 50% of the CGT payable on the disposal of the new chargeable business assets.

If an entrepreneur reinvests the proceeds of that subsequent disposal in a further new business, the relief can also apply on a subsequent disposal of the chargeable business assets of that further new business. Where less than the full proceeds of a disposal on which capital gains tax has been paid are reinvested, only that proportion of the capital gains tax relative to the amount reinvested will qualify for relief.The relief will be given in the form of a tax credit equal to the lower of the capital gains tax paid on the disposal of assets made on or after 1 January 2010 or 50% of the capital gains tax on any gain from the future disposal of the chargeable business assets. Subject to the legislation governing the entrepreneur relief coming into operation, I am informed by the Revenue Commissioners that, where an individual makes a disposal of a chargeable business asset that qualifies for the relief, details of the disposal and chargeable gain made should be included on the individual's tax return for the year in which they occur. The tax return will also include a facility to claim the appropriate entrepreneur relief. The following additional definitions and notes are relevant to the relief:

"Chargeable business assets" for the purposes of this relief mean: assets used wholly for the purposes of a new business carried on by an individual, or new ordinary shares issued on or after 1 January 2014 in a qualifying company over which the shareholder has control and in which the shareholder is a full-time working director.

Chargeable business assets exclude assets that are held as passive investments.

- "Full-time working director" is defined as meaning a director who is required to devote substantially the whole of his or her time to the service of the company in a managerial or technical capacity.

A "qualifying company" is defined as meaning a company which is a micro, small or medium-sized enterprise as defined in Article 2 of the Annex to European Commission Recommendation of 6 May 2003 essentially one which employs fewer than 250 persons and which has an annual turnover not exceeding EUR 50 million, and/or an annual balance sheet total not exceeding EUR 43 million.

"New business" must be a business carrying on relevant trading activities which comprise

- activities which come within the scope of the Employment and Investment Incentive Scheme that is, activities carried on in the course of a trade the profits or gains of which are charged to tax under Case I of Schedule D (subject to the exclusions described in the next paragraph) or

- farming of farm land in the State wholly or mainly occupied for the purposes of husbandry, other than market gardening and that were not previously carried on by the entrepreneur or by anyone connected with the entrepreneur. 

The trading activities that are excluded from the relief are:

- Dealing in commodities or futures or in shares, securities or other financial assets,

- Financing activities,

- Dealing in or developing land,

- Occupation of commercially managed woodlands in the State,

- Operation or managing hotels, guest houses, self catering accommodation or comparable establishments or managing property used as an hotel, guest house, self catering accommodation or comparable establishment,  to the extent that they are not "tourist traffic undertakings",

- Operating or managing nursing homes or residential care homes or managing property used as a nursing home or residential care home,

- Operations carried on in the coal industry or in steel and shipbuilding sectors,

- Film production,

- The provision of professional and similar-type services or facilities by closely controlled companies whose income from such activities, if they had no other sources of income, would be subject to surcharge if not distributed,

- Occasional or once-off activities which, although technically trades for the purposes of assessment of any profits arising from them, would not be regarded as trades  in the common sense of the term.

Tourist traffic undertakings means the operation of tourist accommodation facilities for which Fáilte Ireland (the National  Tourism Development Authority ) maintains a register, the operation of such other classes of facilities as may be approved of for the purpose of the Employment and Investment Incentive Scheme by the Minister for Finance, in consultation with the Minister for Tourism, Culture and Sport, on the recommendation of Fáilte Ireland, or the promotion outside the State of any of the foregoing facilities.

Comments

No comments

Log in or join to post a public comment.