Remember dear old Joyce and Sybil Burden, the octogenerian spinster sisters who sued the Government over their potential inheritance tax bill? They have just lost their case before the European Court of Justice.
To recap, they have lived in the family home all their lives, taking care of their father. On his death, the family home passed to them. They are worried that on the death of one of them, the surviving sister would have to pay inheritance tax on the share of the house passed to her. They fear that she may be forced to sell the house. (Actually, strictly speaking, there is provision in inheritance tax law for instalment payments in such a case as this, but how realistic is that, given the particular circumstances of this case?)
Anyway, the sisters went to court arguing that they were being discriminated against under UK law. The basis of their argument was that, if they were a lesbian couple in a civil partnership, the house would have been exempt from inheritance tax on the death of one or the other. The UK court dismissed their case, and they appealed to the European Court.
The two sisters have a valid point, but I always felt the ‘discrimination’ argument was not going to hold much water. Far better to have kicked up a fuss about the unfairness of inheritance tax. The solution they seek is more likely to be delivered by political means, rather than through the courts. Inheritance tax is an immoral tax. Apart from anything else, I fail to see the logic why a married couple or a civilly partnered couple can claim the exemption, but not, for example, two sisters. If the exemption is based on wanting to prevent much disruption in family life, surely the same could apply to two siblings living together. I’ll be the last person to quarrel about a tax break for married couples, but I fail to understand the limits of this particular exemption.
What about people who never marry? Are their survivors and dependants to feel the full force of the taxman’s ‘great clunking fist’? What is the rationale for that? Does the Government really believe that the unfairness and resentment that this creates is worth it for the extra £4bn a year that inheritance tax generates? This is an unnecessary and arbitrary tax, penalising hard work, savings and enterprise. If the Government will not abolish it, it should at least target the reliefs to prevent such manifest unfairness.
December 13th, 2006 at 5:06 pm
This is the sort of idiocy that Conservatives should look at addressing, it is not fair at all, but will mean a great revamp of legislation causing the government to lose out financially, that is always the hardest law to change.
December 13th, 2006 at 5:26 pm
Inheritance tax is about £4bn a year. Through Government bungling, there has been a £2bn overpayment of tax credits every year. Even without revamping legislation, the Government can afford to abolish, or at least reduce the burden of, inheritance tax. A little more attention to waste would sort this out.
December 13th, 2006 at 6:23 pm
Having been very much involved in this [paying out, I agree: Inheritance tax is an immoral tax. This is an unnecessary and arbitrary tax, penalising hard work, savings and enterprise. This is so, so wrong. What you’ve built up over your lifetime is yours. No one has a right to take it from you at the death knell.
December 13th, 2006 at 6:55 pm
Inheritance tax is immoral. It is a way of taxing you twice after your death and cause further pain and hardship to your loved ones. For the pain it causes, it is not worth the £4 billion of income it generates and as you say Bel, if the government could get its act together in other departments, they wouldn’t really miss the money.
December 13th, 2006 at 10:57 pm
Less that £4 billion, apparently; last year, at least according to the Excel tables on the HMRC website, it amounted to £3.259 billion, or 0.82% of HMRC’s cash receipts. That compares with duties on spirits (0.58%), wine (0.58%) and beer (0.77%). According to a recent answer in the Lords, it raises about the equivalent of 1p in income tax.
I’m not sure I understand the sisters’ plight; the worry is supposedly about the practical effects of having to pay two sets of death duties, once on the father’s death and than once again when one of the sisters dies. But in reality, the surving sister wouldn’t — I’d have thought — have a great deal of difficulty negotiating an equity release arrangement to, in effect, defer the inheritance tax until after her death. If anyone’s disadvantaged, it’s her legatees, who’ll in effect get hit for her inheritance tax as well as their own.
There are, potentially, other ways round it; it’s not something about which I know a great deal, but my late wife had considerable professional expertise — some of which has rubbed off — in these matters, having spent several years administering the financial affairs of a chap who’s worth several million and whose family won’t have to pay more than a couple of thousand in death duties, if that. He’s a UK resident, too, though the trust funds aren’t. I suppose part of the problem is that rising house prices now mean people who never needed to worry about inheritance tax are now finding that some — though not a massive proportion in many cases, I’d have thought — of their inheritance will be subject to it.
Seems to me there would be all manner of problems inherent in extending the exemption to siblings; if you’re going to do anything, scrap it altogether. As Bel says, they manage to lose more than half that in overpaid tax credits in a year. ID start-up costs that they’ve so far admitted to are £5.4billion over 10 years, so that’s half a billion a year waiting to be saved. And don’t even begin to think about the NHS computer cost over-runs.
Or should we use the savings to knock a penny off the income tax, instead?
December 14th, 2006 at 2:56 pm
Agree with Notssaure here. I think if you have enough wealth to be seriously worried then you should have spoken to a financial planner. There are ways around most things in tax law.
Also, I agree that the sibling issue would leave the government exposed to so many types of relationships that would let people off. Then of course the tax take will go down to the point at which it is unviable. If you have this tax then I understand their desire to want to get some people to pay it.
December 14th, 2006 at 4:02 pm
I agree with the point that a ’sibling exemption’ may well make the whole thing unworkable. How about giving people the right to nominate one person to whom they may pass their property without an inferitance tax charge?
Or better still, why not increase the nil rate band to more realistic levels? It is currently set at £285,000. Most houses in the South East are worth at least that. Many more people are therefore within the bracket. I would suggest increasing the band to at least £750,000. That would be fairer to all, siblings included.
The Government keeps parroting on about how only 6 per cent of the population pay inheritance tax. I don’t believe that, especially with house prices rising the way they are.