On 30 September 2019, the Civil Partnership (Scotland) Bill was introduced to the Scottish Parliament for debate. The Bill, if it passes, aims to change the law so that mixed sex couples can enter into civil partnership. This follows the change in legislation in England and Wales where mixed sex couples will be able to enter into a civil partnership by 31 December 2019 at the latest.
These changes come after the Supreme Court ruling that the current UK law is incompatible with the European Convention on Human Rights. It was found that mixed sex couples should have the same options available to them as same sex couples. Should the Bill pass and open up civil partnership to mixed sex couples, it will be interesting to see whether this will become a more popular options for couples who are currently cohabiting but do not wish to enter into a marriage.
There are very few legal differences between a marriage and a civil partnership, however there are major differences between those cohabiting and those in a marriage or civil partnership. There is much more legal protection afforded to civil partnerships than cohabiting couples, particularly in relation to tax planning or in the instances of a civil partner predeceasing.
The law provides that those in a civil partnership have certain rights when transferring property or making gifts. Capital Gains Tax is a tax that is applied on the profit you make when you sell or gift something that has increased in value. This can include property that is not your main home, personal possessions and shares. If you are in a civil partnership, you do not have to pay Capital Gains Tax on assets that you have given or sold to your partner. This is under exception of where you have separated and did not live together in the tax year or you gave your partner goods for their business to sell on.
The situation becomes more difficult where your partner predeceases you. Currently, if your cohabiting partner were to die before you without a valid Will, you would not automatically inherit from their estate. In this case, you would be bound to the legal rules of intestacy and you may only obtain a share of their estate after making an application to the court, no matter how long you have been together. However, where you have entered into a civil partnership you would have a legal right to their estate i.e. if they died without leaving a Will, you would be entitled to claim one third of your partner’s moveable estate (money, shares, cars, furniture and jewellery), if they had children at the time of their death, or half if there were no children. As a civil partner, you would be entitled to a one third of the deceased’s moveable estate if they left children or to one half if the deceased left no children. If your civil partner died leaving a Will which leaves very little to you, you can still claim legal rights.
Another particular obstacle which can arise after death is dealing with Inheritance Tax. Inheritance Tax occurs on an individual’s death or on certain gifts made through a person’s lifetime. Every person has a limit as to the value of their assets that they can transfer on death. This is currently £325,000 and is referred to as a ‘nil rate band’. If a couple are in a civil partnership, it is possible for the deceased’s unused nil rate band to transfer to the surviving civil partner. This is only possible where a couple are married or in a civil partnership. Further, a civil partner is able to transfer the entirety of their assets on death to their surviving civil partner without incurring any tax. There is no limit to the value of the estate that can be passed.
Dealing with tax can be particularly difficult and we are able to provide you with practical, expert advice for your circumstances. If you would like to discuss tax planning, inheritance or have any family related queries then please contact us.
Sandra Sutherland is Partner in our specialist Family Law team, for more information contact Sandra on 03330 430150 or email ssutherland@thorntons-law.co.uk
