Dominic Hannigan (Meath East, Labour)
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254. To ask the Minister for Finance if he will consider the idea of cohabiting couples being allowed to share their tax credits, similarly to married couples, if they meet strict criteria; and if he will make a statement on the matter. [34283/15]

Michael Noonan (Limerick City, Fine Gael)
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Where a couple is cohabiting, rather than married or in a civil partnership, each partner is treated for the purposes of income tax as a separate and unconnected individual.  Because they are treated separately for tax purposes, credits, tax bands and reliefs cannot be transferred from one partner to the other.  Cohabitants do not have the same legal rights and obligations as a married couple or couple in a civil partnership which is why they are not accorded similar treatment to couples who have a civil status that is recognised in law.

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. 

From a practical perspective, it would be very difficult to administer a tax regime for cohabitants which would be the same as that for married couples or civil partners.  Married couples and civil partners have a verifiable official confirmation of their status.  It would be difficult, intrusive and time-consuming to confirm declarations by individuals that they were actually cohabiting.  It would also be difficult to establish when cohabitation started or ceased. 

It should also be noted that while there may be an advantage in tax legislation for a married couple or civil partners as regards the extended rate band and the ability to transfer credits, their legal status has wider consequences from a tax perspective, both for themselves and for persons connected with them.

To counter tax avoidance, transactions between 'connected persons' are frequently subject to anti-avoidance provisions throughout the various Tax Acts.  The definitions of 'connected persons' extends to relatives and children of spouses and civil partners.   Were the tax treatment of married couples / civil partners to be extended to co-habiting couples, it would be very difficult to prove and enforce such anti-avoidance measures in respect of persons connected with a cohabiting couple, where the cohabiting couple has no legal recognition.