The financial arrangements - Tax relief outside divorce proceedings (deed of separation)


The maintenance for a separated spouse can be dealt with either by way of court order, which can be obtained in the magistrates court, or under a deed of separation.

The deed of separation states the date of separation and the agreed amount of maintenance payable by one spouse to another on an annual basis. A maintenance agreement must be capable of lasting for more than 12 months for it to be effective for tax purposes.

If a spouse's maintenance is detailed in a deed of separation or under the terms of a court order obtained in the magistrates court, the payer will be entitled to tax relief on these payments at basic rate if he or she is a basic rate tax payer, or at higher rate if he or she is in the higher rate tax bracket. The basic rate of tax for the year 2015/13 is 29%. See http://www.hmrc.gov.uk/rates/it.htm

When paying maintenance to children it is vitally important that it is paid under a court order, as this is the only way that the payer can obtain tax relief on the payments.

A deed of separation detailing maintenance payment to children is insufficient for tax relief purposes. If there are no divorce proceedings, an order with regard to the children's maintenance can be obtained on application in the magistrates court by the custodial parent, or alternatively, on application to the county court under the Guardianship of Minors Acts 2001 and 2003.

It is essential that these payments are expressed as being payable to the child and not to an adult on behalf of the child. If the latter is the case the income will be treated as income of the adult payee and the child's single person's allowance cannot be set off against those payments.

Payments made to a child which are not under a court order are considered to be the income of the payer and consequently no tax relief can be obtained on them.


KIRSTY APP on divorce - Next:

The financial arrangements - Voluntary maintenance payments

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