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UK Inheritance Tax Ruling Upheld by European Court

Tom Burroughes

30 April 2008

The highest court in Europe has upheld a ruling preventing two co-habiting elderly British sisters from enjoying the same right to avoid inheritance tax bills as is enjoyed by married UK couples. The Grand Chamber of the European Court of Human Rights, the ECHR's appeal court, voted by 15 to 2 in favour of agreeing that the treatment of Joyce and Sybil Burden did not violate EU anti-discrimination law. The ruling, issued on the court�s website, marks the final chapter of the sisters� three-year battle to win the right to enjoy relief from inheritance tax. When one spouse in a marriage dies any unused tax-free allowance for inheritance tax shifts to the surviving spouse. However, these allowances do not apply to people in a non-legally binding relationship like the Burden sisters. When one of the sisters dies, the remaining sister could be forced to sell their home in southern England. Ms Burden was born in 1918 and her sister was born in 1925. "There will be sighs of relief at the Treasury this morning after the Government won its case against the Burden sisters," Julian Washington, partner at London law firm Forsters said. "This is the end of an epic struggle over inheritance tax for the two sisters. If they are still cohabiting when one of them dies then they will now, definitely, face an inheritance tax charge. The rules allow that tax to be spread over ten years - rather than being paid immediately - but if the surviving sister cannot afford that a sale may be the only option," he said. At present, a deceased person�s estate is taxed at 40 per cent above a nil-rate threshold of £312,000 . UK inheritance taxes have been attacked by critics who say the nil-rate threshold has not risen in line with asset prices and incomes in recent years, dragging increasing numbers of individuals into the tax net. Had the court ruled in favour of the Burdens, it would have caused chaos for UK lawmakers and forced significant changes to UK tax law, he said.