Separating, but remaining married

Hi Mr Eastwood,

From a Revenue standpoint you would be regarded as married but living apart.

There are different rules for different taxheads.

For income tax, you would be assessed as two single individuals (Separate Treatment). You could not, for instance, opt to be jointly assessed as this is only available to married couples who live together or who, if living apart, pay legally enforceable spousal maintenance payments.

The significance is that for income tax, you could not share or transfer tax credits or rate bands, even where one of you does not fully use those credits or rate bands.

Special rules apply in the year of separation.

If you intend to transfer any assets to each other during your lifetimes, remember that the CGT spousal exemption only applies where the asset is transferred while you are still living together. Any assets transferred subsequent to that date will incur a liability on the spouse who transfers the asset.

Your separation has no effect on CAT and so spousal exemptions would apply.

Since yours is an informal separation, Revenue will treat you as living apart from the date that arrangement is likely to be permanent. That date is up to you.
 
Hi Sophrosyne,

Thanks for your detailed explanation. I would appreciate it if you could clarify a few of the points you made.
Sophrosyne said:
The significance is that for income tax, you could not share or transfer tax credits or rate bands, even where one of you does not fully use those credits or rate bands.
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Ref above, I have a total income about 24.5K My wife has an income of about 11.5K. We have the standard credits. Would you know if either or both of us will pay more income tax when separated.

Sophrosyne said:
If you intend to transfer any assets to each other during your lifetimes, remember that the CGT spousal exemption only applies where the asset is transferred while you are still living together. Any assets transferred subsequent to that date will incur a liability on the spouse who transfers the asset.
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CGT meaning "capital gains tax". what is CGT spousal exemption, and how does it come into play with an asset transfer between spouses. I can understand how CAT comes into play

Thanks in advance
 
Capital Gains Tax is charged on the disposal of assets. It is charged on the person disposing of the asset.

Disposal means disposal by any means, e.g., by sale, by gift, etc.

It is very common for people who are separating to overlook Capital Gains Tax because they assume that transferring or gifting assets to each other after they separate and during their lifetime has no tax consequences. They often put off what they should have done before they separated.

While you are living together it has no consequences as asset transfers between spouses who are living together are, generally, exempt from CGT.

However, once you separate, that exemption ceases.

Regarding income tax, from what you say, your joint income is equal to the exemption limit for married couples, €36,000 and so you are not currently paying any income tax. Is that correct?
 
Sophrosyne said:
Hi Mr Eastwood,

From a Revenue standpoint you would be regarded as married but living apart.
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What exactly is the Revenue definition of "living apart?" The Courts have, for Family Law purposes, accepted that you can be "living apart" but still under the one roof at the one address. Would this count?

Conversely, you could have a situation where spouses are very much married but actually living (perhaps temporarily) in different locations, maybe for work reasons or such.

If living together/apart becomes a contested issue, where does the burden of proof lie? And does this tend to be a contentious area?
 
Usually, the couple agree that they are living apart, even if living in the same property.

As mentioned, Revenue will treat them as living apart if and when the couple agree that it will be on a permanent basis.

There might be contention, but that is not a matter for Revenue, but rather mediation or the Courts.
 
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Hi Sophrosyne, Thanks again for your valuable advice.
Sophrosyne said:
While you are living together it has no consequences as asset transfers between spouses who are living together are, generally, exempt from CGT.

However, once you separate, that exemption ceases.
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Normally CGT is payable on a gain on assets when sold or gifted, but one's private principle residence PPR is exempt from this. Is it the case that if I transfer the house (our PPR) that we have lived in for decades into both names after we separate, that CGT will be payable on the full gain since purchase, or will it be payable on half the gain as it will not be a full transfer to my wife, but rather we will each own half the house.

Or would it be the case that CGT would be due only on the gain (or half the gain as the case may be) in value since the date of separation.
Either way the message I'm getting from you is, transfer to both names before separation.

The points you have made have raised a few more questions in my head. If the transfer is done to both names, and the new property is bought in joint names, will both properties be considered PPR's

If either our existing house, or the future new property, both in joint names is sold at a future date will CGT be payable on either property.

If in the future one of us want to move, that is sell one property and buy another, again in joint names will there be any complications, tax wise or otherwise.

If in the future the existing more valuable house is sold, and my wife down grades to a smaller property leaving a cash surplus, can that cash be transferred into our joint bank account without penalty.

Ref your income tax question. I paid about €1400 tax last year as I did some part time work. I am also doing some work this year, but possibly will not be doing any from next year onwards.

Thanks very much again
 
There are a numerous issues, a few are:

Full PPR exemption applies only where the individual lives in the property for the entire ownership period, otherwise it is apportioned.

Transferring a share of an asset is a part disposal with special computational rules.

An individual can only have one principal private residence (PPR) at any one time.

If you intend to transfer assets to each other after you cease to live together, then you really should seek professional advice.


Regarding Income Tax, you spouse’s income is under the single exemption limit, €18,000 and so is exempt from Income Tax.

As your income exceeds that limit, exemption will not apply, and you will be entitled to the tax credits and rate bands appropriate to a single individual.
 
The fact that Mr Eastwood plans to remain married but live separately is not being taken into consideration here. For a married couple who are living separately to be taxed as single from the date of separation they must also have a clear intention to end the marriage, which Mr Eastwood says is clearly not their plan currently.

If one of a couple ended up in a nursing home they are still married but living separately, so lots of examples of this.

Some interesting information here:

It says “there is provision for separated spouses to elect to be jointly taxed for income tax purposes but that option is not available for capital gains tax purposes”

It still makes sense to me for both houses to be in joint names before making the move to live separately.
 
Clamball said:
The fact that Mr Eastwood plans to remain married but live separately is not being taken into consideration here. For a married couple who are living separately to be taxed as single from the date of separation they must also have a clear intention to end the marriage, which Mr Eastwood says is clearly not their plan currently.
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That is exactly what is being taken into consideration here.

He will be married but living apart. In his situation he cannot elect to be jointly assessed. See post #21
 
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Hi Sophrosyne & Clamball

I never dreamt that a married couple deciding to live in two separate properties could be such a minefield. Every question answered raises further questions.

Thanks for for your patience and your professional advise so far, would you be kind enough to answer a few more questions.
Sophrosyne said:
Since yours is an informal separation, Revenue will treat you as living apart from the date that arrangement is likely to be permanent. That date is up to you.
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Is it totally up to my wife and I to declare when the separation is likely to be permanent, e.g. could we declare this in 10yrs time, and in the meantime preserve all the benefits of a married co-habiting couple?

Following your advice I am going to transfer our existing house to joint names, however I am finding the payment of CGT somewhat difficult to grasp and am curious as to the workings of it. As a working example, assuming our house has gained 400K in value since purchase by me in my sole name. If I transferred that house to both names 1 day after separation, what CGT would be due? If I transferred to both names 5yrs after separation, when it has gained a further 100K in value, what CGT would be due?

If we separate and declare to revenue that it is likely to be permanent, hypothetically, could we reunite in future years and return to the tax treatment of a normal married couple?

Sophrosyne said:
An individual can only have one principal private residence (PPR) at any one time.
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I have no problem understanding the above, my question really is: considering both our existing house and the future new property will be in joint names, will our existing house be considered a PPR for tax purposes as long as my wife lives in it, and likewise for the new property as long as I live in it?

Thanks Clamball for the link re tax for separated couples, very useful article. Is it your understanding from that article, that separated couples can elect to be treated jointly for income tax purpose? Its a bit unclear to me.

Thanks to all in advance
 
You need to dismiss the opinion of anyone who is giving you the false impression that you have the option to elect to be jointly assessed.

From Revenue’s website:

“Separation, divorce or dissolution of civil partnership
When you separate, divorce or dissolve your civil partnership, you can choose to be treated as married or in a civil partnership for tax purposes. To claim this treatment, you should:

  • send written notification, signed by both partners, to Revenue by the end of the tax year
  • be paying legally enforceable maintenance payments
  • both be resident in Ireland
  • not have re-married, if you are divorced. This also applies to your former spouse or civil partner.”

Indeed, in linked article to Doyle Keaney Tax Advisors states:

“Separated spouses are treated as singly assessed from the date of separation unless they have validly elected for joint assessment and maintenance payments are made under a legally enforceable arrangement.”


Turning to Capital Gains Tax, obviously, if you don’t transfer assets to each other after you separate and during your lifetime then there can be no occasion for a CGT charge.

If you do, as mentioned, you need to engage the services of a professional who will tailor advice to your situation and with whom you can discuss various options.

Mr Eastwood said:
I never dreamt that a married couple deciding to live in two separate properties could be such a minefield. Every question answered raises further questions.
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The concluding paragraphs of the linked article to Doyle Keaney Tax Advisors quite rightly states:

“The taxation of relationships and their dissolution can be complicated. The complications arise from the fact that there are no uniform rules under the various tax heads, with different rules applying to cohabiting couples and married couples and the tax rules varying from the legal rules. The impact of the different rules cannot be underestimated and, as with all things law and taxation, timing is of the essence. It cannot be overstated how important timely advice is to manage the tax impact and tax exposures for both parties in what is already undoubtedly a hugely charged situation.”
 
Hi Sophrosyne, I have had a very busy few days.

Thanks very much for your valuable professional advice. Your link to the revenue site was very useful. As per your recommendation I will indeed get professional advice. Also, things are in motion to put our existing house in joint names

In the meantime if you have the time (and the patience) I would be very interested in your views on the questions I have raised above, I have copied them in below again.

Considering both our existing house and the future new property will be in joint names, will our existing house be considered a PPR for tax purposes as long as my wife lives in it, and likewise for the new property as long as I live in it?

If I'm correct my understanding is that separation is effective for tax purposed, from the date my wife and myself declare to revenue that it is likely to be permanent. If that's the case, is it totally up to my wife and I to declare when the separation is likely to be permanent, e.g. could we declare this in 5 or 10yrs time, and in the meantime preserve all the benefits of a married co-habiting couple?

Thanks in advance
 
Mr Eastwood said:
Considering both our existing house and the future new property will be in joint names, will our existing house be considered a PPR for tax purposes as long as my wife lives in it, and likewise for the new property as long as I live in it?
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In short, no.

A married couple who are living together can have only one principal private residence.

A married couple who are living apart in such circumstances that the separation is likely to be permanent can each have a principal private residence from the date of separation.

That should answer your second question.
 
Once again Sophrosyne, thank you very much for your clear answer.

When you say "that should answer your second question" I think you may have have been answering from the perspective of CGT/PPR. When I asked the second question I was thinking of joint assessment for income tax purposes. I know you have already made it quiet clear that I should dismiss any false impression that we have the option to elect to be jointly assessed, but to be nitty gritty, can we remain jointly accessed until both of us declare to revenue that our separation is likely to be permanent. If we delayed that declaration, no doubt we would lose the CGT exemption from the date we start to live in separate properties.

I have numerous questions I could ask, but you have been very helpful so far and I wont tax you any further (pun intended)

Again, thanks in advance.
 
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