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Tax charity calls for improved guidance
The tax treatment of couples is unclear and leads to complexity and confusion, according to the Low Incomes Tax Reform Group (LITRG).
A new report from the charity calls for improved guidance on couples taxation, a review of legislation and practice to achieve consistency in the definition and treatment of couples for different tax and benefit purposes, and the extension of bereavement support to parents who lose a de facto spouse.
The paper, Couples in the Tax and Related Welfare System – a Call for Greater Clarity, recommends the introduction of a formal registration process with HMRC and the Department for Work and Pensions to “make an official declaration that a couple has been formed (or has separated), to provide some certainty for couples who have made a clear decision to enter into (or separate from) a committed relationship with each other”.
LITRG chairperson Anthony Thomas said, “Couples are faced with a high degree of complexity in the tax system.”
He cited the case of a recently separated married couple who face an array of rules that apply to them for eligibility for the new marriage allowance, the length of time in which they can continue to transfer assets between them free of capital gains tax, and the period in which transfers are exempt from inheritance tax.
“It may also be difficult for them to prove a date of separation to determine when they could make separate claims for tax credits,” said Thomas.
He warned that individuals who are clear about being a couple could still find themselves in a “compliance nightmare… exacerbated by the inadequacy of official information accessible to ordinary taxpayers” if government officials refuse to recognise the relationship status and launch an investigation.
