Two “straight” Irish men have declared their intention to marry, a little more than two years after the Republic of Ireland legalised same-sex marriage, so that the younger of the two may inherit his friend’s property after his death without having to pay tax on that inheritance.
The news immediately sparked comment among observers of the international tax avoidance scene, where the recent Panama and Paradise papers have fueled a growing sense that tax avoidance is just a complicated type of tax evasion. Some experts pointed out, however, that “death bed marriages” for inheritance tax (IHT) purposes have long taken place, and government authorities could be reluctant to initiate measures aimed at preventing them.
News of the pending nuptials of an 85-year-old Dublin man identified only as “Matt” and his carer, Michael O’Sullivan – who is described as “younger” but whose age hasn’t been given – first appeared in Irish media on Friday, on the Liveline radio show of Irish national broadcaster RTÉ, and the RTÉ’s news website. The story was quickly picked up by the BBC and such specialist media outlets as Pinknews.co.uk.
O’Sullivan, Liveline radio listeners were told, had been best friends with his 85-year-old neighbour Matt for almost three decades, and was now his carer. When the two discussed Matt’s plans to leave his house in Dublin’s Stoneybatter neighbourhood to O’Sullivan when he died, the IHT problem arose, O’Sullivan explained, noting that “because of tax reasons I’d have to pay half of [the value of the house] to the government” in Capital Acquisitions Tax (CAT), as the Irish equivalent of IHT is known.
Aware that under Irish law, those who are married or in civil partnerships are exempt from CAT, the two men decided to get around the IHT problem by tying the knot sometime before Christmas, they told Liveline listeners.
“Matt said ‘he’s my best friend, we’re getting married so whatever I have in my home he can have’,” the RTÉ report said.
“The pair had planned on getting married on 22 December in Co Tipperary, but [now] say that due to weather conditions the nuptials may be postponed until January.”
Gerry Brown, an Edinburgh based tax commentator, is among those who believe the couple’s planning strategy will be successful.
“Shortly before her death from cancer, Goody married an ex-partner, Jack Tweed,” Brown points out.
“A cleverly-constructed will, which incorporated a flexible trust, ensured that while IHT was successfully avoided through spouse exemption, Tweed did not benefit to any significant extent. The main beneficiaries under the trust were Goody’s children.”
Brown adds that Ireland’s Capital Acquisitions Tax is unlike the UK’s IHT in that “the burden of CAT falls on the individual inheriting wealth, rather than on the deceased’s estate.
“In this CAT is similar to the tax systems in most European countries. CAT has a spouse exemption which operates in basically the same way as with IHT.
“Similar strategies have been used many times in the UK without challenge from HMRC.
“Although Ireland, like the UK, has a general anti-avoidance rule, it seems unlikely it would apply to a marriage.”
According to Brown, the Irish Revenue Commissioners, as the Irish tax authority is known, have summarised tax avoidance as being defined as: “using tax reliefs and allowances in a way in which they were not intended to be used.
“Tax avoidance may also involve the re-labelling or re-characterisation of a transaction which was undertaken primarily to claim a tax advantage, and not primarily for business reasons.
“Tax avoidance often involves contrived, artificial transactions that serve little or no purpose other than to give rise to a tax advantage.”
Given this definition, he adds, “it is difficult to see how a marriage involves using a relief in an unintended way.”
‘I Now Pronounce You Chuck & Larry’
The idea of two men marrying in order for one of them to receive the benefits of the other partner was the subject of a 2007 American film, I Now Pronounce You Chuck & Larry, about two straight, unmarried Brooklyn firefighters who pretend to be a gay couple in order to receive domestic partner benefits. The situation of Matt and his carer is different, though, in that they are not pretending to be gay, even though they are taking advantage of a legal arrangement – same-sex marriage – that had been brought in to accommodate gay couples wishing to marry.