Asked by
To ask Her Majesty’s Government what plans they have to make
transfers of property between long-term, cohabiting siblings
exempt from inheritance tax.
(Con)
My Lords, while the Government are understanding of the issue,
there are no plans to exempt transfers of property between
long-term cohabiting siblings. The inheritance tax spouse
exemption is long-standing and reflects the formal legal
obligations that marriage and civil partnership relationships
necessarily entail. Extending that would be precedent-setting, as
no analogous legal status exists between cohabiting siblings.
(Con)
My Lords, can there be any doubt that siblings who share their
lives in jointly owned homes represent strong, stable families?
It is a fundamental principle of conservatism to support all
families. Why therefore do the Government continue to deprive
these families of the protections that they deserve, no less than
married couples and civil partners, to ensure, among other
things, that no bereaved sibling has to face the agony of selling
the family home on the death of a loved partner in order to pay
an inheritance tax bill?
(Con)
My Lords, of course the Government recognise the strong family
ties that my noble friend refers to. However, that is a different
matter from the formal legal obligations that marriage and civil
partnership relationships entail. I also remind noble Lords of
the context that 95% of estates pay no inheritance tax at all.
(Con) [V]
My Lords, could my noble friend explain why the Treasury thinks a
sexual relationship is necessary to avoid the trauma of losing
one’s home to pay inheritance tax when one member of a
long-standing couple dies?
(Con)
As I said to my noble friend , the issue is
around the unique legal relationship that marriage and civil
partnerships entail. No similar legal relationship exists for
siblings.
(CB) [V]
Does the Minister agree that life can be very unfair to single
people and elderly people? This law is discriminatory. Siblings
and family carers may have struggled on for years looking after
each other, and they are saving the state a fortune in social
care. Why should they not enjoy a tax deferral when one of them
dies, especially since the state will recover on the death of the
second survivor?
(Con)
I remind noble Lords of the context that each individual can pass
on at least £325,000 without any inheritance tax charge. That is
well above the average house price in the UK. For those who are
affected, there are also provisions where it is possible to have
10 years to pay off inheritance tax in instalments if the estate
contains a house that is unsold.
(Lab)
[V]
My Lords, to follow up on the interesting question from the noble
Baroness, Lady Deech, is there not a compromise? If the problem
is a requirement for a sibling to sell a jointly owned and
occupied property to pay IHT, why not simply defer the deceased’s
liability, thereby leaving the surviving sibling undisturbed? The
taxman would ultimately be paid. This could be done on the basis
of a charge on the property, perhaps even tapered in favour of
the Revenue or the surviving sibling, dependent on tax rate
policy.
(Con)
My Lords, to add to my previous answer, for those in certain
circumstances, joint ownership would also mean that a house had
to exceed £650,000—more than the average house price, including
in London—to be liable for inheritance tax. As I say, there are
arrangements in place whereby you can have up to 10 years to pay
off inheritance tax in instalments if the estate contains an
unsold house.
(LD) [V]
My Lords, in support of the noble Lord, , without a
change in the law, it pushes siblings who can afford it to employ
expensive lawyers to incorporate a discretionary trust in their
wills, which on a joint estate of £800,000 will save tax of
£130,000, not as the Minister has just said. Does she agree that
there is an urgent need to change the law to make such
imaginative tax avoidance unnecessary?
(Con)
My Lords, I am afraid the Government do not agree that this is an
urgent issue. It is an issue that we have debated a number of
times in this House, and, while we have sympathy with those who
may be affected, we emphasise that it is a minority of people.
Having looked very carefully at this issue, we believe that the
current status is the right one.
(Lab) [V]
My Lords, in the run-up to the Spring Budget, surely the Treasury
should be grappling with questions such as the one raised by the
noble Lord, . However, many
people across the UK are concerned not about the intricacies of
inheritance tax but about rising council tax bills and the
potential for Covid-19 economic support to be withdrawn in just
seven weeks’ time. Is the Minister able to offer any reassurance
to those who are struggling to make ends meet?
(Con)
My Lords, without previewing the Budget in a few weeks’ time, I
can reassure the noble Lord that all measures to support families
during this difficult time are kept under review. Those reviews
take into account the current circumstances that the country
faces.
(Con) [V]
My Lords, inheritance tax hits people when they are at their most
vulnerable—when they are bereaved. It is an unfair tax, paid on
taxed money by only around 5% of estates, penalising all those
who have done the right thing and saved for their old age. Surely
we should be encouraging families to live together. Please can
the unjust tax situation be looked at again, with a view to
remedying this particular situation about siblings?
(Con)
My Lords, the Government understand that individuals work hard to
build up their assets to pass on to their families. That is why
the nil rate for inheritance tax exists and, as my noble friend
has noted, exempts the vast majority of estates from paying
inheritance tax. I also note that it makes an important
contribution to the funding of public services in this country,
equivalent to around 1p on income tax.
(CB)
My Lords, the Minister tells us that 95% of estates do not pay
any inheritance tax. In that case, could she tell us what
estimate Her Majesty’s Treasury has done of the infinitesimally
small number of people who would come under this situation? Has
it done any research? Does it have any evidence to show what the
impact on revenue from inheritance tax would be if it were to
make this legal change, so that those of us who want to see that
change can bring about Private Members’ Bills to so address this
issue if it is unwilling to do so?
(Con)
My Lords, the Government are of course aware of my noble friend’s
previous Private Member’s Bill on this subject. The question is
not just one of cost; it is about legal relationships between
individuals. Married couples and couples in civil partnerships
have a unique legal status and it is difficult to see why
cohabiting siblings should benefit where other cohabiting family
members, for example, would not.
(Non-Afl)
The unfairness in law that the noble Lord, , has rightly
highlighted goes well beyond the question of inheritance tax. In
my experience, cohabiting siblings in mining communities face a
whole range of disadvantages in law. Should the Government not be
looking at the whole issue of the rights of those who choose to
cohabit as, say, brothers and sisters?
(Con)
My Lords, that is a broader point, but I am afraid I am going to
have to disappoint noble Lords: the Government have looked at
this issue in the context of inheritance tax, and may have looked
at it more widely. In the context of inheritance tax, the unique
legal relationship that marriage and civil partnerships entail
has been concluded as the right place to draw the line on this
issue.
(LD)
Does the Minister agree that there is a considerable risk within
the proposal from the noble Lord, , that family
members would find themselves being put under duress not to
marry, to preserve family property and so on? It is not the
wholly benign measure that he would lead us to believe.
(Con)
My Lords, I am not entirely sure that that is the Government’s
motivation for disagreeing with my noble friend . The difficulty
is around drawing the line between the legal status of marriage
and civil partnership and the other status that cohabiting family
members may have. It may not necessarily be around the less
benign implications of drawing the line in a different place.
