Willie Penrose (Longford-Westmeath, Labour)
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98. To ask the Minister for Finance the reason a person (details supplied) in County Westmeath has had their tax credits significantly reduced in the context of the one-parent family tax credit, which resulted in their marginal rate of tax being increased from the 20% standard rate to 41% while they are still paying a mortgage and contributing significant funding towards the upkeep of their children; if there are any tax credits available in relation to maintenance payments made by them for the maintenance of their spouse and children; and if he will make a statement on the matter. [7458/14]

Michael Noonan (Limerick City, Fine Gael)
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The new Single Person Child Carer Credit (SPCCC) is of the same value i.e. €1,650 per annum as the one-parent family tax credit and it also carries the same entitlement to the additional €4,000 extended standard rate band, which increases it to €36,800 per annum, before liability to the higher rate of income tax arises. However, the credit is more targeted, in that it is in the first instance, only available to the principal carer of the child. A system that allows multiple claims in respect of the same child or children is unsustainable. The change follows a recommendation from the Commission on Taxation that the credit should be retained but that it should be allocated to the principal carer only. In order to qualify for the credit the principal carer cannot be married, in a civil partnership or cohabiting.

The principal carer is initially being identified as the person who is receiving Child Benefit in respect of the child. Where, for whatever reason, a principal claimant who is entitled to the credit does not wish to avail of it, he or she can choose to surrender it to a secondary claimant. 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. The secondary claimant cannot be married, in a civil partnership or cohabiting.

I am advised by the Revenue Commissioners that in the case in question, the SPCCC has automatically been granted to the principal carer (i.e. the ex-spouse of the individual referred to in the Deputy's question).

I should point out that there is no specific tax credit for children in the tax code. Therefore, married or cohabiting couples are unable to avail of any additional credit to assist them in the financial maintenance of their children. In certain cases, such couples also need to maintain two households due to the location of employment, for example.

Legally enforceable maintenance payments made for the benefit of a separated or former spouse or civil partner are fully deductible for tax purposes in the hands of the payer and are treated as taxable income in the hands of the recipient. Alternatively separated spouses or separated civil partners may elect to continue to be jointly assessed in which case no regard is taken of the maintenance payment.

Maintenance payments made for the benefit of children are not deductible for tax purposes. However, they are also not treated as income in the hands of the beneficiary. This is similar to the tax treatment of monies used by married couples for the maintenance of their children. Ultimately, child maintenance payments are a matter for parents and if necessary, the courts to decide. It is not possible, and indeed would not be appropriate, for the tax code to take account of every possible variable.

In Budget 2012, in recognition of the difficulty some people have in meeting their mortgage commitments, I fulfilled a Programme for Government commitment to increase the rate of mortgage interest relief to 30 per cent for first time buyers who took out their first mortgage between 2004 and 2008. This was the period during which house prices peaked. In addition, the increased rate of tax relief for first time buyers who took out their first mortgage in that period will continue up to and including the 2017 tax year.