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European Human Rights Court To Hear UK IHT Appeal

by Robert Lee, Tax-News.com, London

12 September 2007


The European Court of Human Rights in Strasbourg will on Wednesday hear an appeal by two elderly British sisters who claim that they should be given the same legal rights as same-sex couples with regard to inheritance tax in the UK.

UK inheritance tax laws allow property to be passed onto a spouse or civil partner without them incurring IHT. However, the law does not extend such rights to siblings, meaning that either Joyce Burden, 88, or her sister Sybil, 80, who have lived together since birth on their family-owned farm, will be faced with an inheritance tax bill on their GBP875,000 house when the other dies.

Each sister has made a will leaving all her property to the other, and this would effectively mean that the Treasury will collect IHT twice on the same house when both sisters have passed away.

The Burdens took their case to the European Court of Human Rights in Strasbourg, arguing that UK law as it stands infringed on their property rights, but, in December 2006, the court rejected their arguments in a tightly contested verdict, with the seven-judge panel voting four to three against the sisters. However, the slim majority verdict means that the sisters still have a fighting change of convincing the 17-member Grand Jury of overturning the original decision when the court hears the case on Wednesday.

The four-judge majority opinion, which included the British representative, stated that: "In the circumstances of the case, the Court found that the United Kingdom could not be said to have exceeded the wide margin of appreciation afforded to it and that the difference of treatment for the purposes of the grant of inheritance tax exemptions was reasonably and objectively justified."

Judge Pavlovschi, from Moldova, in her dissenting opinion, argued that such a situation was "fundamentally unfair", while the other dissenting judges, from Malta and Poland, wrote that that the state will be able to collect its tax in full upon the death of the surviving applicant, "but the state wants to do it twice: first upon the death of the first sister and later by imposing a new inheritance tax on what still remains of the estate".

Currently, inheritance tax in the UK is charged at a rate of 40% above a threshold of GBP300,000 in the 2007/8 tax year. Spouses are exempted from IHT on each other's estate, as are same-sex partners who have registered under the Civil Partnership Act. However, an attempt by the House of Lords to insert an amendment into the legislation including family members over the age of thirty who have lived together for more than 12 years within the exemption was rejected by the House of Commons.


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