Revenue Note for Guidance

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Revenue Note for Guidance

485FA Adaptation of provisions relating to taxation of married couples

This section adapts certain provisions of the Tax Acts where the restriction of reliefs applies to an individual who, with his or her spouse or civil partner, has elected to be jointly assessed (including persons who apply for separate assessment under section 1023 or 1031H) Aggregation of the couples’ or partners’ income will take place at the level of taxable income rather than at the level of total income. This allows for the calculation of the restriction for an individual based on the individual’s own taxable income and not on the joint taxable income of both spouses or civil partners. After the calculation of the restriction, the recalculated taxable income of each spouse or civil partner (or original taxable income if the restriction does not apply to one spouse or civil partner) is determined, the relevant taxable income amounts of the spouses or civil partners are combined and the assessable person is taxed on the combined amount as if it were all his/her income.

The references to total income in subsections (1) and (2) of section 1019 have not changed on the basis that these provisions are concerned with deciding which spouse or civil partner should be the assessable spouse or civil partner and apply regardless as to whether or not the restriction applies. The references to total income in subsection (4)(a)(ii) of section 1019 are also left untouched.

Provision is included to ensure that the adjustments made to the taxation of married couples or civil partners by this section do not affect the value of certain reliefs available, as deductions from total income, to married couples or civil partners jointly assessed to tax. Persons affected by this section will be able to use reliefs, that are currently transferable, where the spouse or civil partner entitled to the deduction is not able to get the full value of the relief because of an insufficiency of income. This provision seeks to maintain the existing position whereby certain deductions from total income are made from the joint income of both spouses or civil partners.

It is similar to the rule that already applies to couples that opt for separate assessment.

Relevant Date: Finance Act 2021