Equal Taxation

A legal bid for equal taxation treatment launched by cohabiting sisters has failed.

Joyce Burden, 90, and her 82-year-old sister Sybil have been fighting for decades for the same rights as married and gay couples in a bid to avoid crippling inheritance tax on their home in Marlborough, Wiltshire, when one of them dies.

But in a 15-2 vote, the European Court of Human Rights in Strasbourg ruled that the Burdens, who have lived together all their lives, do not face unfair discrimination under UK inheritance tax rules.

The elderly sisters claimed the UK's laws breached their human rights by exempting married and gay couples from paying inheritance tax, while targeting cohabiting siblings.

But the Grand Chamber of the human rights court upheld an earlier human rights ruling that national governments were entitled to some discretion when deciding taxation arrangements.

The decision means when one of them dies the other will have to sell their four-bedroom property to pay the 40% inheritance tax on its value above £300,000.

If they had won, UK inheritance tax law would have had to change, to place cohabiting couples on an equal footing with married couples and "civil partnerships."

Carol Wells from the Tax and Probate team at Irwin Mitchell said: "Whilst this decision will come as a huge disappointment to those couples affected by the ruling, it does clarify the law."

"At the end of the day the law is always understood to have been intended to ensure that if all assets are left to a surviving spouse on first death that the inheritance tax liability should be deferred until second death. This was extended to co-habiting couples who have registered their Civil Partnership following the introduction of the Civil Partnership Act in 2006. Prior to that no exemption was available to co-habiting couples, gay or otherwise."

"There is certainly no appetite from Government to extend the relief to other co-habiting couples, so however unfair this decision may seem, the law as it stands is here to stay. This strengthens the need for affected couples to take appropriate advice at an early stage to try and ensure that any liability to inheritance tax is mitigated as far as possible by other means."