Heterosexual men marry for tax reasons!

As reported in the news last week, two Irish men have married in Dublin to avoid paying €50,000 in inheritance tax on a house. Best friends Matt Murphy and Michael O’Sullivan are both heterosexual, but decided to get married when they discovered how much tax would have to be paid on the house Murphy, 83, intended to leave in his will to O’Sullivan, 58, who is his carer. Same sex marriage was legalised in Ireland following a referendum in May 2015.

Here they are seeking to take advantage of the Irish IHT rules (similar to the UK) that mean that there is no IHT on transfers between spouses.

 

Our comment

Although these guys are likely to be safe from an IHT perspective they need to be careful what they are telling the press. The Guardian recently reported that Murphy could not afford to pay O’Sullivan as a carer and O’Sullivan explained “eventually Matt said the only way he could pay me was to leave me the house. He said he would give me the house so I have somewhere to live when he goes.”

They are treading on dangerous ground here as the IHT argument will not protect O’Sullivan from any income tax implications if it can be argued that he is receiving the house as a payment for the carer services that he has provided (under an implied contract). In this case the full value of the house could be subject to income tax! For their ‘scheme’ to work any bequest should be made purely on the basis of friendship and not as a payment for services provided.

Will this open the flood gates and lead to male friends (and female friends) marrying for tax reasons? This is unlikely to happen because (to state the obvious) this avenue will not be available to people who are already married and also most people want to leave their estate to family members who they cannot legally marry (!).

 

Search

Sign up for our newsletter

Interested in receiving the latest tax planning ideas?

Sign up to Tax Bites – our weekly update offering practical but effective tax saving tips.

Contact Us

You can use this form to request us to give you a call or if you prefer just leave us a message. Please be sure to leave us a contact number or email address for you and we will get back to you as soon as we can.

Phone
0161 927 9277

Email
office@forbesdawson.co.uk

Address
Fairbank House
Ashley Road
Altrincham
Cheshire
WA14 2DP