Government Fails to Remove Tax Discrimination Against Gay Partners

KENILWORTH, 26 NOVEMBER 2003 — As the Government announces its plans for gay partnership registration, it has emerged that one of the main discriminations suffered by gay couples – a much greater liability to inheritance and capital gains tax than married couples – has not been rectified in the package.

As the law stands, same-sex couples fall foul of inheritance tax (IHT) or capital gains tax (CGT) rules. If one partner dies, the deceased’s estate has to pay full IHT if left to the same-sex partner, whereas married heterosexual couples are exempt from such taxes. Likewise, if one person gives assets to their gay partner, they could be liable to CGT, but a married couple is exempt.

The Government says, in its report on responses to its consultation on the issue: “Exemption from inheritance tax is a key issue for many same-sex couples. The Budget process will take full account of the comments that have been received as part of the consultation process and their implications for the tax system.”

Terry Sanderson, a spokesperson for the Gay and Lesbian Humanist Association (GALHA), said: “Both these issues were highlighted to the Government by several gay organisations in the consultation responses over partnership registration. We hope that the Government’s equivocation is not a prelude to them quietly reneguing on this vital issue. There is a widespread perception in the gay community that gay couples who register under this new scheme would receive the same inheritance tax and capital gains tax exemptions as married couples do. In fact, the Government is just hoping that the gay community will not notice it is being short-changed on probably the most important issue of all. We challenge the Government to make an unequivocal commitment to equality in these areas otherwise the whole initiative will have been an exercise in cynicism.”

There are real victims to the current unfair arrangements. The DTI report cites a case of a woman who is “one half of a lesbian couple with twelve-year-old twins. She is dying of breast cancer. The effect on her partner will be to force her to sell their jointly owned house and uproot the children at a very difficult time in their lives.” The disposal will have been forced by the discriminatory tax rules.

Terry Sanderson said: “These omissions seriously undermine the partnership proposals. If the Government wants the gay community to believe its claims about equality, then it needs to think again and formally undertake to give gay couples the same exemptions as married couples in both inheritance and capital gains tax before these proposals become law.”