This is the story behind the amendment I am moving on Monday 29th during the passage of the Care Bill. It is the plight of two very elderly sisters who have lived together all their lives, unmarried, and who cared for their parents when they were alive. Now when one of them dies the survivor will have to pay a hefty inheritance tax on the value of their home, so large that she will have to sell it to raise the cash. And that may mean her having to go into residential care, and in any case, an unsettling move in her last years. If they were two women who were married or in a civil partnership, the tax would be deferred until the survivor died, so that she could stay on undisturbed. This is clearly discriminatory.
The sisters took their case to the European Court of Human Rights in Strasbourg, but they lost. The court said that the way they were treated was indeed discriminatory compared to married couples, but that Britain was entitled to draw a clear line between the way married people (& civil partners) were treated, and others, in pursuit of valuable social goals. This is how it was reported at the time.
http://news.bbc.co.uk/1/hi/england/wiltshire/7372555.stm
That clear line has now blurred, because same sex couples will soon be able to marry, and they too will benefit from the inheritance tax relief. I got interested because two of my former pupils were the barristers representing the sisters; I have mentioned their plight a few times in parliamentary debates, and the sisters have written to me. The government has not been sympathetic so far.I tried to get a similar amendment passed during the debate on the Marriage (Same Sex) Bill, so that when the government reviews civil partnerships, as it is committed to do, it could also look at the legal situation of family members who have lived together for decades. I failed, as the government and the opposition were not willing to give any ground to amendments, no matter how innocuous, during the passage of that Bill. But the case for saying that sisters/brother/parents and children (who live in the same house and are elderly) are discriminated against, is now much stronger. For after the passage of the Marriage (Same Sex) Bill, they are the only people who cannot marry or form civil partnerships and thereby gain the tax relief on death that they deserve. Every other adult in the population can take advantage of marriage or civil partnership if they wish to, for all sorts of reasons, including tax, but family members, like the sisters, or a daughter who has cared all her life for an elderly parent in the same house, cannot.
My goal would cost the government nothing. Only about 3% of the population are affected by inheritance tax, so the number of family members living together who fall in this category is probably very small. I am not suggesting that they be relieved of inheritance tax altogether, simply that when one of the two dies, the tax be deferred until the death of the survivor. It is not appropriate for the Lords to suggest changes in tax law, so this amendment is presented as an inquiry. Indeed, there are other rights that may be relevant to the situation of the family members described above, e.g. occupation of the home, consent to medical interventions and so on. So I hope that the Lords will now accept this amendment and move to end the discrimination.
The title to this blog, by the way, comes from the song in the film White Christmas: “Sisters, sisters, There were never such devoted sisters” –http://www.stlyrics.com/songs/i/irvingberlin1953/sisterssisters665226.html and the lyrics are well worth reading . . .
@Baroness Deech:
The sisters would have to go to an accountant who is expert in property trusts, so not knowing if they have any disposable income is a difficulty. However, the fees could be offset until after death of both parties.
What they should look into is some kind of single asset unit trust. I think they can pledge the house as an asset as two sole owner individuals. Somehow pledge the house as an asset to a company and let the company hold it until after death of both parties.
There is a way if you can find the clever accountant with the right expertise and a leaning toward pro-bono work.
Of course, it goes without saying, this is an injustice in the worst way. Funny how discrimination is okay for some but totally objectionable with others. Human rights Court should have had more cajones, but, the UK screams loudly at European Court decisions. Even when the decisions made are in the best interests of the UK subject.
They would have to take advice along the lines above.
“But the case for saying that sisters/brother/parents and children (who live in the same house and are elderly)…”
Should there not be a need to define elderly, also when and how long a close relative has lived in the home (rather than being a name on a title), and whether they can prove how much they have fiscally contributed to the running of the home?
I am sympathetic but I largely agree with Maude (above) and, further, do not agree with your assertion that it is discriminatory, unless you also change the various Marriage Acts to allow everybody to marry anybody. In which case, let everybody marry anything.
While I like the idea of deferred tax (a sort of roll over), and if the idea is to defer the tax due on the House (‘the survivor will have to pay a hefty inheritance tax on the value of their home’) rather than total assets then there is precedence for treating that as a special thing (i.e. 10% a year instalments), I don’t understand the references to same-sex marriage:
“That clear line has now blurred, because same sex couples will soon be able to marry, and they too will benefit from the inheritance tax relief.”
“For after the passage of the Marriage (Same Sex) Bill, they are the only people who cannot marry or form civil partnerships and thereby gain the tax relief on death that they deserve.”
How has same-sex marriage blurred the lines – and, indeed, changed anything at all – regarding this? Are there any people who can gain IHT exemption via same-sex marriage who could not have gained it via Civil Partnership?
So Maude. If they put it in trust, they have to have no interest. Difficult.
Now notice too what the core problem is. It’s IHT. It’s not marriage, its the existence of the tax.
What applies to these sisters, applies to parents and children, to brothers, even to friends.
It’s the state taxing them in the first place, and then when they die, taxing them again. The problem is tax.
Likewise with marriage. It’s the states involvement in marriage that cause the problems, along with the antidemocratic nature of the law changing.
Get the state out, and its sorted.
I think it’s slightly unforuntate that you have linked elderly sisters living together with married and civil partners and have got confused with the differences between both groups. Married/Civil Partners are quite different to carers living with people or with relatives living together. I also find your title “sisters sisters” a bit misleading as there is a myriad of combinations that might arise, we have all seens Dads Army with Godfrey living with his two sweet elderly sisters, so perhaps your title isn’t quite apt.
I do see, however, a possible case for delaying inheritance tax until the last death but it is a complicated and possible costly (for the govt!) sitution. Will any money be left on the last death?
It also sounds like you are very keen to equalise the rights between gay civil partners and those not already covered by CPs who are in the same sitution ie straight couples in loving, stable relationships (usually sexual). Surely it is these couples who are now discriminated against and it is such an obvious discrimination which I would’t have thought the European courts would tolerate. The sooner the govt reviews straight CPs the better.
Dear Baroness Deech
Sorry to hear about the situation of the elderly sisters. Hope you succeed in getting enough support from the House of Lords.
I read the article on the 2 sisters you posted and I really can’t see how the surviving sister would have paid any inheritance tax on their main residence. The IHT exemption is quite generous. The 2 sister did, however, have 2 additional properties and an unknown amout of additional assets , investments and cash. Their main residence would have been exempt from IHT and it would have only been their additional properties etc that would have taken the other sister into IHT.
Perhaps a more sympathetic example could have been chosen?
I have heard of private residence exemption from capital gains tax, but not from IHT. Can you explain?