Inheritance tax – Sibling cohabitees – Discrimination – Applicant sisters claiming right to exemption from inheritance tax after living together in same property for 30 years – Exemption applying to married couples and same-sex civil partnerships under existing domestic law – Applicants likening their situation to spouses and civil partners – Whether exemption applicable to applicants – Whether tax system entitled to provide broad categories distinguishing between different taxpayer groups – Application dismissed
The applicants were unmarried sisters who had lived together for the past 31 years in a house built on land inherited from their parents.
The applicants owned property in joint names. In 2006,it was valued at £425,000, or £550,000 if sold with adjoining land. The applicants also jointly owned two other properties worth £325,000 in total. In addition, each owned, in her sole name, shares and other investments worth approximately £150,000. The applicants had each made mutual wills by which each left all her property to the other. They submitted that the value of their jointly owned property had increased so that the half-share of each was worth significantly more than the current exemption threshold for inheritance tax.
Under sections 3, 3A and 4 of the Inheritance Tax Act 1984, inheritance tax was charged at 40% of the value of a person’s property, including his or her share of any asset owned jointly, passing on his or her death and on lifetime transfers made within seven years of death. Interest was charged on any tax that had not been paid within six months after the end of the month in which the death occurred. Any inheritance tax payable by a person to whom land was transferred on death could be paid, at the taxpayer’s election, in 10 equal yearly instalments, unless the property was sold, in which case outstanding tax and interest had to be paid immediately. Section 18(1) of the 1984 Act provided that property passing from the deceased to his or her spouse was exempt. Under the Civil Partnership Act 2004, that exemption was extended to a deceased’s “civil partner”.
The applicants argued that, contrary to Article 1 of Protocol l (right to peaceful enjoyment of possessions) to and Article 14 (prohibition on discrimination) of the European Convention on Human Rights, when one of them died the survivor would face a significant liability to inheritance tax that the survivor of a marriage or civil partnership would not have to pay.
Held: The application was dismissed.
The applicants, as cohabiting sisters, could not be compared for the purposes of Article 14 to a married or civil partnership couple. It followed that they had not been discriminated against and there had been no violation of Article 14 taken in conjunction with article 1 of Protocol 1.
The relationship between siblings was of a different nature to that between married couples and homosexual civil partners under the UK’s Civil Partnership Act. One of the defining characteristics of a marriage or Civil Partnership Act union was that it was forbidden to close family members. The fact that the applicants had chosen to live together all their adult lives did not alter that essential difference between the two types of relationship. Moreover, marriage conferred a special status on those who entered into it. The exercise of the right to marry was protected by Article 12 of the Convention and gave rise to social, personal and legal consequences.
As with marriage, the legal consequences of civil partnerships under the 2004 Act set that type of relationship apart from other forms of cohabitation. The absence of a legally binding agreement between the applicants rendered their relationship of cohabitation, despite its long duration, fundamentally different to that of a married or civil partnership couple.
David Pannick QC and Samuel Grodzinksi (instructed by Wood Awdry Wansbroughs, of Chippenham) appeared for the applicants; Jonathan Crow QC (instructed by the Foreign & Commonwealth Office) appeared for the respondent.
Eileen O’Grady, barrister
