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GAZETTE
JANUARY/FEBRUARY 1983
provision is present, the draft agreement could be
submitted to the Revenue for confirmation that the
provision will be effective for tax purposes.
Separation Agreement made a Rule of Court:
In a case where a Separation Agreement is made a
Rule of Court, other than by reference to the Family
Law (Maintenance of Spouses and Children) Act
1976 ("the 1976 Act"), the tax treatment is not
altered and is as described above.
Where, under Section 8 of the 1976 Act, a
Separation Agreement is made a Rule of Court the
tax treatment is the same as where maintenance is
determined by the Court, viz:
1. The payment shall be made without deduction of
Income Tax (Section 24) of the 1976 Act).
2. The payment is not deductible for tax purposes
against the payer's income.
3. The recipient is not taxable on the amount
received.
For example, if A agreed to pay Mrs. A £10,000
per annum for the rest of her life under the terms of a
Separation Agreement without mention of tax the
position is as outlined above, viz:
1. A pays £6,500 to Mrs. A.
2. A pays £3,500 to the Revenue Commissioners.
3. A writes £10,000 against his taxable income
(thereby bringing his taxable income, upon
which his income tax liability is calculated, to a
much lower figure with resultant saving in actual
tax payable).
4. Mrs. A is taxable on £10,000 less allowances, etc.
5. Mrs. A is entitled to a deduction of £3,500 from
her tax liability.
If Mrs. A applied and was successful in having the
maintenance agreement made a Rule of Court under
Section 8 of the 1976 Act the position would change
to the following:
1. A pays Mrs. A £10,000.
2. A makes no deduction or payment to the
Revenue Commissioners.
3. A is not allowed write-off the payment against his
taxable income.
4. Mrs. A is not taxable on the £10,000 received.
Clearly in these circumstances A might have to
apply to the Court pursuant to Section 6 of the 1976
Act for a variation downwards of his maintenance
obligation, which application should be presented on
the basis of A's net (after tax) income.
Maintenance Orders:
Where the Court makes a maintenance order
under Section 5 of the 1976 Act the tax treatment is
that as described for maintenance agreements which
have been made a Rule of Court under Section 8 of
the 1976 Act (see
Brolly v. Brolly
[1939] I.R., 562).
Personal Allowance:
There are two circumstances in which a man is
entitled to a marriage allowance:
1. Where he is living with his wife and he is assessed
to tax on her income as well as his own, or
2. where he is not living with his wife but she is
wholly or mainly maintained by him and he is not
entitled to write-off any maintenance for tax
purposes. (See Sections 138 and 192/195,
Income Tax Act 1967.)
The usual situation in which a husband who is
separated will be granted the marriage allowance is
where he is making payments under a maintenance
order and these payments are his wife's main means
of support.
Where the maintenance payments are only a small
part of the wife's income or where the husband is
allowed a tax deduction for payments under a
maintenance agreement he will only rank for the
single allowance.
The marriage allowance is £2,900 for 1982/83 and
the single allowance £1,450.
Section 192 of the Income Tax Act 1967 treats a
wife as living with her husband unless:
(a) they are separated under an Order of a Court of
competent jurisdiction, or
(b) they are separated pursuant to a Deed of
Separation, or
(c) they are in fact separated in such circumstances
that the separation is likely to be permanent.
Rates of Taxes:
In accordance with Section 8 of the Finance Act
1980 a separated couple are both taxable at the single
rates. This arises by virtue of the fact that only those
taxable in accordance with Section 194 of the Income
Tax Act 1967 are entitled to the "Double" rate bands
and to be taxable under Section 194 a husband and
wife must be living together.
Child Allowance:
Section 141 of the Income Tax Act 1967 entitles a
taxpayer to an allowance for each child living with
him/her at any time during the year of assessment.
Where two persons claim for the same child the
allowance shall be granted in the proportion that they
maintain the child. Maintenance payments that are
allowed for tax purposes are not taken into account.
The child allowance for 1982/83 is £100.
Single Parent Allowance:
Under Section 138A Income Tax Act 1967 a
separated taxpayer, entitled to the child allowance,
will also be entitled to a Single Parent Allowance.
The Single Parent Allowance is £1,450 for 1982/83.
Capital Gains Tax:
No Capital Cains Tax arises on
transfers between spouses provided they are living
together. (Section 13 (5) Capital Gains Tax Act
1976.) The term "living together" is defined in
Section 192 Income Tax Act 1967 (above).
This can cause problems in practice as a couple will
in most cases have separated at the time assets are
transferred between them, and a Capital Gains Tax
liability may arise for the transferor.
It should also be noted that to get the full
exemption on the sale of a private residence under
Section 25 of the Capital Gains Tax Act 1975 the
seller must have resided in the residence for the full
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