At present, there are 'forbidden' marriages, for example between a brother and sister. The Civil Partnership Act 2004, which takes effect from 5 December 2005, seems to offer a tax planning opportunity. Consider the following scenario.
Two ladies register as a civil partnership. They have been living in the same property for five years. One is aged 25 and the other is aged 75. The civil partnership is registered and one week later the elder lady dies leaving her estate to the younger. There will be no inheritance tax charged. The elder lady was the grandmother of the younger.
At present, there are 'forbidden' marriages, for example between a brother and sister. The Civil Partnership Act 2004, which takes effect from 5 December 2005, seems to offer a tax planning opportunity. Consider the following scenario.
Two ladies register as a civil partnership. They have been living in the same property for five years. One is aged 25 and the other is aged 75. The civil partnership is registered and one week later the elder lady dies leaving her estate to the younger. There will be no inheritance tax charged. The elder lady was the grandmother of the younger.
Does the legislation allow any civil partnerships and, if so, can the above succeed? If not, what similar planning possibilities do readers foresee?
Query T16,621 — Civilian.
Reply from Richard Frimston
Although the Civil Partnership Act 2004 comes into effect on 5 December 2005, the tax consequences of registration have not yet been finalised. As Kevin Slevin pointed out in 'All that glisters is not gold', (Taxation, 21 April 2005, page 74) the tax changes highlighted in 'Tax and civil partners' (Taxation, 24 March 2005, page 620) have yet to be set out in statutory instruments under FA 2005, s 103. Once these are in place, a civil partnership is not wholly good news for all taxpayers.
The Civil Partnership Act 2004 is a long and complicated piece of legislation and has separate sections for England and Wales, Scotland and Northern Ireland. The law in each of these three jurisdictions will be slightly different, but each will have similar rules against relationships by consanguinity and limitations on relationships by affinity.
Civil Partnership Act 2004, Sch 1 sets out the rules for England and Wales.
Sch 1 para 1 prohibits partnerships between parents and children, including adoptive and former adoptive children, and between grandparents and grandchildren and between uncles and aunts and nephews and nieces, in all circumstances.
Sch 1 para 2 prohibits partnerships between various categories where one party is under 21 and has been a child of the family, e.g. a child of a former spouse. Provided that the child has not been a child of the family and is now over 21, the relationship is permitted.
Para 3 prohibits partnerships between persons under 21 where some other person is still alive, e.g. the former spouse of a child cannot be a partner of the child's parent unless the child and the child's other parent are both dead.
So inheritance tax planning opportunities are limited and not available in this query. But there will be circumstances, subject to the statutory instruments, where some planning may be considered. A widow living with the widow of her son, might be prepared to register a civil partnership as could someone living with his or her adult stepchild who has never been a child of the family.
Generally, a civil partnership will have the same effect in law as a marriage, so that in England and Wales (but not in Scotland) a Will would be revoked by a civil partnership and claims under the Inheritance (Provision for Family and Dependants) Act 1975 can be made by civil partners or persons living together as civil partners. The succession and tax consequences of a civil partnership will be very different in and outside the UK, cross-border issues need to be very carefully considered.
