What is our tax situation on returning to Ireland as a married couple?

Q: Naomi, Cayman Islands

My husband and I have been living in the Cayman Islands for the last 4 years. We are planning to come back next year.

Before we left Ireland, my husband was using my tax free allowance as I was a stay at home mum. My husband must come back in July to avoid paying tax on his income earned in 2017. Do I also need to be out of the country until July as he is using my tax free allowance, or can I return before him?

A: Barry Flanagan, tax manager with Taxback.com

The short answer is no - your return date is not relevant, as a tax relief known as “aggregation relief” should offset any negative tax consequences. However there are many factors to consider.

I understand from your query that both you are your spouse are Irish and non-resident in Ireland for tax purposes, as a result of your relocation to the Cayman Islands. In addition, I understand that you have spent most of the last four years in the Caymans and that you are not working outside of the home.

The charge to income tax in Ireland is based on the interaction of three determinants - residency, ordinary residency and domicile status. Residency is based on the number of days you have in Ireland in any given year; ordinary residency is based on your residency pattern, while domicile is connected with where you intend to base yourself permanently.

Based on the information provided, it would appear that at present you are non-resident, non-ordinarily resident and domiciled in Ireland. In such circumstances, an individual is taxable on their Irish source income only, including income from employment exercised in Ireland.

Depending on the date on your return next year, you and your spouse will either be resident or non-resident in Ireland for tax purposes. It seems likely that a return prior to July 1st would mean your spouse may have enough days in Ireland to be resident, while a post July 1st return would usually mean your spouse would be non-resident, though his movements in the prior year could impact. While residency potentially means more income is taxable in Ireland, it also means that your spouse will be entitled to full tax credits.

Considering both scenarios, if your spouse is resident in Ireland in 2017, he will be taxable on his worldwide income from all sources. As a resident, he would be entitled to tax credits and the increased standard rate band you referred to, under joint assessment. While joint assessment is only available where both individuals are resident, aggregation relief would mean you are effectively treated as jointly assessed. A further relief known as “Split Year relief” could also be claimed, which would exclude your spouse’s employment income earned prior to his return from the charge to Irish tax.

If non-resident, then your spouse would be taxable on his Irish sourced income and employment income from the date of return.

You mentioned that you are a stay at home mum. You should also consider whether you would also qualify for the Home Carer tax credit, which is now worth €1,000.

Barry Flanagan is a Senior Tax and Payroll Manager with Immedis, a specialist division of the Taxback Group. He is a is a qualified Chartered Accountant, Chartered Tax Consultant and Chartered Company Secretary.

[ abroad@irishtimes.com ]