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The Civil Partnership Act 2004 received Royal Assent on 18 November 2004 and comes into force on 5 December 2005. The purpose of the Act is to enable same-sex couples to obtain legal recognition of their relationship by forming a civil partnership. Civil partners will be subject to many of the same legal rights and responsibilities as spouses.
Two people may register as civil partners of each other if:
- they are of the same sex
- neither of them is already a civil partner or married
- they are not within the prohibited degrees of relationship
- they are both over the age of sixteen (and the consent of the appropriate persons has been obtained if either of the parties are under eighteen).
For tax purposes, civil partners will be treated the same as married couples. From the start of the civil partnership scheme on 5 December 2005, tax charges and reliefs and anti-avoidance rules will apply equally to married couples and civil partners, and those treated as such. The Government has published the draft Regulations that will give effect to the necessary changes to both primary and secondary tax legislation from 5 December 2005.
The taxchanges that have some significance in the context of payroll are changes to
- the married couple's allowance
- the blind person's allowance,
- tax relief on life assurance premiums
- Employment income and Benefits Code.
Married couple's allowance
The married couple's allowance is available to a married man whose wife is living with him and either of them was born before 6 April 1935. There are two rates of allowance; the higher rate applies if either the husband or wife is aged 75 or more. The current legislation, set out in the Income and Corporation Taxes Act 1988, gives the full allowance in normal circumstances to the husband, but allows the wife to have half of the allowance if an election is made to that effect, or even more if the husband's earnings are insufficient to take advantage of the full amount of the allowance.
The changes that are to be made to accommodate civil partnerships are in two parts. First, the existing rules continue unchanged but apply only to couples who were married before 5 December 2005.
A new set of rules apply to couples who marry or enter into a civil partnership on or after 5 December 2005. However, couples who are eligible under the pre-5 December 2005 rules may elect to move to the new rules.
The new rules operate in the same way but the appropriate allowance is initially given to whichever of the partners to the marriage or civil partnership has the higher income for the year. If their income is the same, they may elect for one of them to receive the allowance. The same options to split the allowance equally or transfer any unused allowance to the other partner are still available.
Blind person's allowance
The blind person's allowance is available to a person who is registered blind. Under current rules, if the blind person is married and has earnings that are insufficient to make full use of the allowance, the wife or husband is entitled to the unused part. From 5 December 2005, the arrangement applies equally to civil partners.
Tax relief on life assurance premiums
Other related tax relief arrangements that currently apply to husbands and wives are also extended to civil partners, i.e. tax relief on pension-related life assurance premiums paid by individuals, and tax relief on life assurance premiums paid by employers under retirement benefit schemes.
Employment income and Benefits Code
In the employment income and Benefits Code provisions of the Income Tax (Earnings and Pensions) Act 2003:
- in the context of services provided through an intermediary (IR35), where the intermediary is a partnership, the definition of "relative" is extended to include a civil partner in the context of the conditions for liability, and couples of the same sex living together as if in a civil partnership are treated as if they were civil partners
- where a tax liability arises if a benefit is provided for a member of an employee's family and household, the term "family" is extended to include the employee's civil partner as well as spouse, and to the civil partners of the employee's children as well as their spouses
- the meaning of the term "relative" in the definition of "material interest" (relevant to identifying lower-paid employees and to benefits such as living accommodation and beneficial loans) is extended to include "civil partner"
- the definition of "relative" in the context of loans that are not employment-related loans is extended to civil partners as well as spouses
- in defining childcare that is not "qualifying childcare", the definitions of "partner" and "relative" are extended to include civil partners
- the exemption from tax for health and employment insurance payments is also extended to circumstances where the payments are made to the employee's civil partner
- the special expenses rules for travel to and from the UK are extended to civil partners as well as spouses
- the £;30,000 tax exemption for payments made in connection with termination of employment or a change in the duties of or earnings from employment is extended to payments received by a person's civil partner as well as spouse.
A number of other similar changes apply in the context of pension income, social security income and the anti-avoidance rules for securities.
...back to 3 November 2005
Source:
The Tax and Civil Partnership Regulations 2005
Explanatory Memorandum to the Draft Tax and Civil Partnership Regulations 2005
The Tax and Civil Partnership (No. 2) Regulations 2005
Explanatory Memorandum to the Draft Tax and Civil Partnership (No. 2) Regulations 2005
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