David Whiscombe comments on the (lack of) effect for tax purposes of the Supreme Court decision.
Newspapers (remember those?) and websites have reported in varying degrees of detail the success of Siobhan McLaughlin in the Supreme Court [2018] UKSC 48. This was the case in which an unmarried mother whose long-term partner had sadly died claimed that she ought to be entitled to the same Widowed Parent’s Allowance as would have been paid to her had she and her partner been married.
She won. So, if unmarried partners must be treated in the same way as a married couple for these purposes, it must open the door to equal treatment for tax purposes, right?
Wrong.
First, the Supreme Court didn’t decide that Miss McLaughlin was entitled to the payments claimed. It declared that the law that prevented her from getting them was inconsistent with the Human Rights Act (“HRA”): but that doesn’t of itself change the law. It is up to the government, having been told of the inconsistency, to decide what, if anything, to do about it.
Second, the majority of the judges (there was one dissenting judgement) concluded that although Widowed Parent’s Allowance was payable to a widow, it was paid (obviously) only if there were children involved and it was in effect and in substance paid for the benefit of the children. Failure to pay it to the surviving partner in an unmarried relationship was therefore effectively discriminating not against the partner but against the children. It was that discrimination that offended against the HRA.
Contrast that with the decision in the lower courts in the same case, which had not been pursued to appeal, that the failure to pay Bereavement Payment (which has nothing to do with children) to a surviving unmarried partner was consistent with the HRA. Broadly, promoting the institutions of marriage and civil partnership is a “legitimate aim” which can justify treating the parties to them differently from the parties to less formal liaisons.
Thus, the McLaughlin decision leaves untouched those elements of the tax system that discriminate in favour of marriage or civil partnership, including the ability to transfer assets free of Capital Gains Tax, unlimited Inheritance Tax exemption (in most cases), and the (very modest) Married Couple’s Allowance. If you want those advantages, you will still have to bite the bullet and tie the knot.
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This article has also been published in Tax Journal issue 1411 and is available on the Tax Journal website.
Hear more from David Whiscombe at our Capital Gains Tax webinar on 13 September.
