This note looks at the debate on the treatment of spouses and civil partners for the purposes of inheritance tax, principally in the context of the passage of the Civil Partnerships Act 2004, and the provisions in Budget 2005 to ensure the tax system treated each in the same way.Jump to full report >>
Inheritance tax (IHT) is levied on the value of a person’s estate at the time of their death. It is charged at 40% above the nil-rate band, which is set at £325,000 for 2019/20. Certain gifts are exempt from tax irrespective of their size, and irrespective of whether they are made during one’s life or made under the terms of one’s will. Since the introduction of inheritance tax in 1986, this class of exempt transfers has included any transfer made to one’s spouse.
In June 2003 the Labour Government proposed the introduction of civil partnerships: a new legal status for same-sex couples. Many of those responding to the Government’s consultation exercise argued that the IHT relief for transfers between spouses should be extended to couples in civil partnerships.
The Civil Partnership Act 2004 received Royal Assent on 18 November 2004 and took effect from 5 December 2005. The Act contained provisions to replicate the rights and responsibilities of opposite-sex couples for same sex-couples in relation to certain tax credits and social security benefits only. However, during the passage of this legislation the Government made it clear that civil partners would be treated in the same way as married couples for tax purposes, and provisions to this effect were included in the Finance Act 2005.
At the time of this reform some commentators argued that the Government should extend IHT relief to siblings as well as couples, but without success. Despite a long-running court case which concluded in an unsuccessful appeal to the European Court of Human Rights in April 2008, it remains the case that this IHT relief is restricted to spouses and civil partners.
This note looks at the debate that was had on the way spouses, civil partners and siblings are treated for the purposes of IHT in the context of the introduction of civil partnerships. The issue has not come up very often since the passage of this legislation, although the Government has recently reiterated its opposition to extending civil partnerships to siblings in relation to a Private Members Bill, tabled this Session in the House of Lords by Lord Lexden, which sought to make this change.
The Marriage (Same Sex Couples) Act 2013 now enables same sex couples to marry. It also enables civil partners to convert their partnership to a marriage, if they wish. At present, civil partnerships may be registered only by same sex couples. However, section 2 of the Civil Partnerships, Marriages and Deaths (Registration Etc.) Act 2019 requires the Government to make and bring into force regulations to extend civil partnership to eligible opposite sex couples in England and Wales by no later than 31 December 2019. This issue is examined in a second Commons Briefing paper.
 For more details, see Inheritance tax: a basic guide, Commons Briefing paper CBP573, 5 July 2019.
 In England & Wales. The Marriage and Civil Partnership (Scotland) Act 2014 enables same sex couples to marry in Scotland.