Terence Flanagan (Dublin North East, Independent)
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186. To ask the Minister for Finance the changes made in recent budgets for separated persons; his views on their context and fairness; and if he will make a statement on the matter. [44236/14]

Terence Flanagan (Dublin North East, Independent)
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187. To ask the Minister for Finance his plans to provide help through a new tax relief for separated fathers who have big costs including maintenance and other expenses; and if he will make a statement on the matter. [44237/14]

Michael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 186 and 187 together.

Although not specifically related to separated persons, I assume that the Deputy's question refers to the replacing of the One-Parent Family Tax Credit with the Single Person Child Carer Credit from 1 January 2014.  The new credit is more targeted in that it is, in the first instance, only available to the principal carer of the child.  Its introduction replaced a system that allowed multiple claims in respect of the same child.

The Commission on Taxation acknowledged that the previous One Parent Family Tax Credit played a role in supporting and incentivising the labour market participation of single and widowed parents.  However, in its recommendations it concluded that the credit should be retained but that it should be allocated to the primary carer only. The restructuring of the credit achieves such an outcome.

The person who cares for the child for most of the year is entitled to the credit in the first instance. Agreement as to who will be the primary carer of a child is a matter for the parents or guardians. However, only the primary carer is entitled to the credit.

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 may need to maintain two households due to the location of employment, for example.

It should be noted that where a primary carer is married, in a civil partnership or cohabiting they would not be entitled to the new credit (or indeed the former one). This is because the child is being cared for, in the main, in a family unit which includes two adults. In such circumstances the primary carer cannot relinquish the credit to a secondary carer. For the same reasons it follows that a secondary carer who is married, in a civil partnership or cohabiting, would not be entitled to the new credit (or indeed the former one) regardless of the marital status of the primary carer.

As regards the potential of this change to interfere with the level of maintenance payments, if such reasoning were to be applied, then any general tax increase, as a result of an adjustment in tax credits, rates or bands could lead to similar situations.  Ultimately, 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.

Notwithstanding the above, as a result of an amendment which I brought forward at Committee Stage of Finance Bill (No.2) 2013, 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 carer 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.  However a principal carer may not relinquish the credit for a number of reasons.

I am satisfied that the tax credit in its current form is working as intended and I have no plans to change it at this time.

As regards tax relief for maintenance payments and other costs incurred by separated fathers, the position is that maintenance payments in respect of children are not taxable in the hands of the children or the receiving spouse.  The effect of this is that the payments are treated in the same way as if the taxpayer was providing for the child out of his or her after-tax income.  This is in line with the tax treatment of all other parents, where the cost of maintaining their children is not tax deductible.