The Burden sisters lose - why?

The Burden sisters lose - why?

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It's not in accountingweb news as I write but it's on the ECHR site - the old ladies lose by the staggering margin of 15 to 2. What puzzles me is that the status of marriage was seen by the ECHR to be reserved to heterosexual couples, and civil partnership to homosexual couples and so neither could be compared to two little old ladies living together as sisters, as they are, and so they could be liable to IHT fairly on the death of the first of them. See http://www.echr.coe.int/echr/

But where in the Civil Parnership Act does it say, or even imply that the civil partners have a sexual component to their relationship? It might be in the minds of the Mail and the Express but it ain't in the Act. It does exclude the 'forbidden degrees of relationship' but it doesn't give a right to dissolution based on non-consumation which is an option as far as annulment of a marriage is concerned. I haven't read the arguments put forward in their favour but if this was omitted from the arguments put forward on their behalf I will be very disappointed with their legal team.

Carers and old ladies like this need protection - not the ludicrous doubling of the exemption from the tories and transferability of the exemption from labour. It only requires a statutory right to postpone the liability until the death of the survivor. I'm going to write to my MP - can I suggest you write to yours? If we can get Income Splitting deferred surely we can held these two old ladies?

Paul Soper

Replies (8)

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By Paul Soper
02nd May 2008 15:22

Dennis - wrong injustice
The injustice is the principle that a person in this situation may be compelled to sell a house they have lived in for many years to meet an IHT liability. Being single persons the eventual tax take is higher but that is the difference between marriage and not - hence the other suggestions made here of removing spouse exemptions - that achieves equality of liability by a different route but exacerbates the real problem.

It has been suggested that they own several properties and could afford to pay the IHT anyway, but that is not the issue, nor was it, as far as I am aware, argued in the case at either level.

It still leaves the issue that the Civil Partnership Act does not require that the parties be homosexual, despite the emphasis placed by some of the ECHR judges on the case. A planning opportunity then for the thick-skinned perhaps.

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By flurrymc
01st May 2008 16:56

Total tax take
The injustice in these circumstances is the total tax take on the estate, following the 2nd death. For a married couple the total take will be about £100k, for the sisters the total tax take is nearly £250k.

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By User deleted
30th Apr 2008 20:22

Drawing the line?
I would personally like to see the exemption/deferral of tax on the PPR only for relatives that live together provided and no exemptions for the rest of the estate. There would have to be anti-avoidance where the inheritor had already had assets passed to them by the deceased relative in some form - maybe treat the death MV of all passed property under CLTs and PETs previously to ensure that the exemption was fairer. Any flaws in that? Wills would decide what was a fair division of assets to family members. It seems simple enough to legislate for using existing PPR definitions.

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By AnonymousUser
30th Apr 2008 18:50

So where would you draw the line?
My late grandmother retired and lived with her sister until her sister died. Should their joint home - their estates went in fact to their children, not each other - have been exempted from IHT? What if a child stays living at home (all too common these days) while another moves away. Suppose the one who stays home - maybe because they cannot be bothered to get a decent job - does do some caring in a trivial sense - but why should they get an IHT exemption over and above their sibling who might actually devote just as much time and effort to looking after the parent, perhaps in other ways? What if both parents die in a car accident while fit and healthy still - should the child who stayed at home still get a tax break? How would you decide who is a carer to benefit from this rule - another 50 pages of tax legislation to define that?

I think tax and indeed all law should strive above all to be clear and achieve predictable results. I abhor the proposed income shifting rules for that very reason. Changing IHT to try & cover the cases mentioned here would end up being equally messy. There are always going to be some outcomes which seem unfair, but hard cases do not make good law.

Denis' comment makes me think even more that there was rather more to the Burden sisters' campaign than the supposed risk of losing their home.

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By flurrymc
30th Apr 2008 16:48

IHT calculation
Rachel, Paul,
The Burden sisters are not a good example for your general principle. They own 3 properties, their joint estate is worth about £875k, on the first death the IHT payable will be less than £35k. This could easily be raised without disposing of their main residence.

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By User deleted
30th Apr 2008 15:43

I agree with you Paul
It seems massively unfair that where two adults share a house for whatever reason they are not treated consistently. Unmarried couples at least have the option to marry for IHT relief - relations living together do not. Carers are particularly a case in point. I have no objection to IHT being charged where the inheritor has another property - but to charge IHT on a property which neccessitates a sale of that property and forces someone to move from their home is immoral. When the reason for the living together is not just financial but in a carer capacity (saving the state a significant financial burden in the process) it's doubly immoral. It's something that is going to become even more of a problem for the future - property prices are so high relations are increasingly living together. Deferment would be an excellent solution.

Jane's argument doesn't stack up - if there is another home owned there is no financial hardship in the tax payable on selling a home you don't live in. We are talking about a home as a PPR, not a financial investment. In fact many parents are taking out second mortgages on their homes and businesses to fund cash gifts for property purchase by their children as PETs (tax-free transfer of funds reducing the value of their estate for IHT as well). The parentally subsisidised adult child gets a property price uplift for their own home and the value of the total estate is potentially reduced - compared to the situation of the carer much better taxwise. How is that tax policy morally fair?

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By Paul Soper
30th Apr 2008 11:42

Read more carefully please.
I am not proposing an exemption for the old ladies - I am simply proposing that a carer, or someone in this position, should have the right to have their part of the liability postponed, nothing more, until the second death or sale of the property so that they are not, as they are at present, compelled to sell the property to meet the IHT burden - that is completely wrong.

I do also feel separately that there is an issue that the ECHR failed to recognise in the absence of any sexual relationship requirement in a civil partnership - however if the old ladies had the right to postpone liability until the second death they would never have needed to commence their lengthy legal process in the first place.

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By AnonymousUser
30th Apr 2008 09:29

Alternatively
the government could remove the special exemptions for spouses and civil partners - with a possible exemption for family homes where there are still minor children.
My point being that if we start to campaign along the lines of what Paul is proposing ie anyone who shares a house should be exempt from IHT then this could be the outcome. If you test it, what rationale is there for an elderly married couple to be able to leave the house tax free, other than a sentimental one that someone might want to stay in a house? I've known plenty of widows and widowers sell up and move on.
I am sure this is an unpopular view to express but personally I'm not sympathetic to the Burden sisters. They have presumably been aware of this for years and could have arranged their affairs to deal with this risk eg by taking out life assurance. I also assume they inherited the house from their parents, since they have lived their all their lives. Why should that somehow justify a different tax treatment from those of us who have not done that?
I have always wondered if this case was intended rather more as a way to get at civil partnerships by those who are not sympathetic to such relationships.

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