Your money - 15 February 2012
Q. My partner and I have recently given notice of our intention to enter into a civil partnership. One of the areas we are unsure of is the taxation treatment of civil partnerships. Could you briefly outline what our position would be once we enter into partnership? We are both working at present.
A. The Civil Partnership and Certain Rights and Obligations of Cohabitants (CPCROC) Act came into effect on 1 January 2011. Three months’ notice of civil partnership registration is required.
The legislative changes required to give effect to the taxation changes arising from the Act are included in the Finance (No 3) Act 2011.
Similar tax provisions that apply to married couples, in year of marriage and subsequent years are now available to civil partners.
Once your civil partnership is registered you can advise your local Revenue office of the date of registration of your civil partnership and quote your own PPSN and your civil partner’s PPSN, or complete a Nominated Civil Partner Election Form.
The taxation of civil partners is similar to that of married couples. The same reliefs and exemptions as those of married couples apply. In the year of registration of the civil partnership, both partners will continue to be taxed as two single individuals. An additional year of registration relief may be due and dealt with on a review basis after the end of the tax year (similar to year of marriage relief). In subsequent years the same options available to married couples will apply, i.e. joint assessment, separate assessment or separate treatment.
As individuals in a civil partnership you may choose the method of taxation which is best suited to your circumstances. In the absence of a specific election, joint assessment will apply to the civil partnership and once a choice has been made it will apply for future years unless an application is made for separate treatment or separate assessment, within the same time limits as for a married couple.
The effect of joint assessment is that one civil partner becomes the nominated civil partner, (i.e. the civil partner assessable on both incomes under joint assessment). Either civil partner may be nominated and in the absence of a nomination Revenue will deem the civil partner with the highest income as the nominated civil partner.
Civil partners can continue to be treated as single individuals if one of them gives notice before the end of the year of assessment that they do not want to be jointly assessed for that year.
Once you are assessed under joint assessment you can specify how you wish to have your tax credits and standard rate band allocated between you and your civil partner. The extended rate band is available to one civil partner only. If you are assessed under separate assessment any transferable unused credits or standard rate band can be transferred on a review basis.
Capital Acquisitions Tax
There are no tax implications in respect of gifts or inheritances take by individuals in a civil partnership from each other. A surviving civil partner is exempt from Inheritance Tax on all assets he or she may inherit from the deceased civil partner.
A child of a civil partnership, whether it is your child or the child of your civil partner, is entitled to a Group A tax free threshold in respect of gifts or inheritances taken from either or both civil partner in a civil partnership. The current tax-free threshold for Group A is €250,000 which applies to gifts and inheritances taken after 7 December 2011.
Capital Gain Tax may apply to the donor of certain non-cash gifts.
Stamp Duty may apply to the recipient of a gift of land, property or shares. Stamp Duty relief will be available for certain relatives (including children), who take a gift of non-residential property.
For further information go to the Revenue website at www.revenue.ie
Q. I have been advised that I will be provided with a company car from the start of March. I am just wondering what the taxation position is in relation to this. My business mileage will be in the region of 30,000 kilometres per annum.
A. Where a company car is available for the private use of an employee the employee is chargeable to PAYE and PRSI in respect of that use.
Travel to and from work is private use.
The notional pay to which PAYE and PRSI must be applied is determined by reference to the “cash equivalent” of the private use of the company car. The cash equivalent is determined by applying a percentage based on business kilometres to the “Original Market Value” (OMV) of the vehicle supplied (whether the vehicle is acquired new or second-hand or leased by the employer).
The cash equivalent can be reduced by any amount required to be made good, and actually made good, by the employee directly to the employer in respect of any part of the cost of providing or running the car.
|Annual Business Kilometric Thresholds||Cash Equivalent (% of OMV)|
|24,135 or less||30%|
|24,136 to 32,180||24%|
|32,181 to 40,225||18%|
|40,226 to 48,270||12%|
|48,271 or over 6%||6%|
In the case of certain employees whose annual business travel does not exceed 24,140 kilometres, the cash equivalent of 30% of OMV may be reduced to 20% giving an effective cash equivalent of 24% of OMV.
This alternative basis is available where the following conditions are complied with. The employee:
- Works an average of not less than 20 hours per week
- Travels at least 8,047 business kilometres per annum on the employer’s business
- Spends at least 70% of his or her working time away from the employer’s premises
- Retains a log book detailing business kilometres, business transacted, business time travelled and date of journey, and the log book is certified by the employer as being correct.
Based on the business mileage quoted by you and taking an “Original Market Value” of €30,000 the taxable Benefit-in-kind charge would be:
€30,000 x 24% = €7,000
This will be taxed through the PAYE system on a weekly/monthly basis at your marginal tax rate plus PRSI.
If you have any queries on money or taxation matters which you would like answered, please send them to "Your Money", c/o Examiner Publications (Cork) Ltd., City Quarters, Lapps Quay, Cork