Current status and tax and pensions implications of the extension of civil partnership status to mixed sex couples. Every now and then legislation is made that, aside from having legal, commercial and human consequences, also has (or will have when enacted) an impact on taxation. Taxation is not the driver of the change that is the subject of this article, but there are tax consequences; important tax consequences.
The change is incorporated in the Civil Partnerships, Marriages and Deaths Bill currently moving through Parliament. Broadly speaking, it will ensure that civil partnerships in England and Wales will be extended beyond same sex partnerships. This will mean that unmarried couples in England and Wales will be able to choose between marriage and civil partnerships if they want to formalise their relationship.
Theresa May announced the proposal at the Conservative Party conference. There is effectively a two-stage process that is being undertaken.
The Civil Partnerships, Marriages and Deaths (Registration Etc) Bill (a Private Members Bill introduced by Tim Loughton) provides for the Secretary of State to undertake a review before the necessary amendments are made. The original explanatory notes state (in relation to the extension of the definition of civil partnership) that:
“Under section 3(1)(a) of the Civil Partnership Act 2004, two people are not eligible to register as civil partners of each other if they are not of the same sex. Equivalent restrictions apply to eligibility for registration in Scotland and Northern Ireland under s.86 and s.138 of the Act.”
“Clause 2 [of the Bill] requires the Secretary of State to undertake an assessment (which may include assessing the demand for civil partnerships amongst opposite sex couples) and then bring forward proposals for how the law ought to be changed to bring about equality of treatment with respect to the future ability of opposite-sex and same-sex couples to form a civil partnership. It then provides a power to amend the law accordingly. The power to make regulations is subject to the affirmative resolution procedure.”
An amendment to his own Bill by Mr. Loughton, which was carried, takes things a little further though. The amendment requires the Government (as a kind of “hard red line”) “to make regulations … to bring about equality between same-sex couples and other couples” within six months of the Bill becoming law. This means that civil partnerships are set to be extended to all by Autumn 2019.
The Bill has, at the time of writing, received its second reading in the House of Lords and will now proceed to the committee stage.
It was made clear by the Minister of State for the Home Office that despite the existence of a separate private members bill to allow civil partnership for siblings this Bill would almost certainly not receive Government support.
Civil partnerships were introduced for same sex couples by the Civil Partnership Act 2004. In 2013, the Marriage (Same Sex Couples) Act 2013 legalised same sex marriage in England and Wales; and the Marriage and Civil Partnership (Scotland) Act 2014 legalised same sex marriage in Scotland. However, the law does not currently permit civil partnerships between mixed sex couples anywhere in the UK.
The proposal to extend civil partnerships to mixed sex couples comes after a Supreme Court case in June 2018, which ruled in favour of Rebecca Steinfield and her partner Charles Keidan, who campaigned to be allowed to have a civil partnership. Following the case, the Court said that the Civil Partnership Act 2004 was incompatible with the European Convention on Human Rights.
In her announcement, the Prime Minister said “As home secretary, I was proud to sponsor the legislation that created equal marriage. Now, by extending civil partnerships, we are making sure that all couples, be they same sex or opposite-sex, are given the same choices in life.” The Government has indicated that there are still a number of legal issues to consider including in relation to pensions and family law, and ministers are consulting on the technical detail.
In response to the Supreme court ruling, the Scottish Government also launched a consultation (which closed on 21 December 2018) on the possibility of extending civil partnerships to mixed sex couples in Scotland.
It is clear though that the extension of formal civil partnership status will not extend to siblings eg brothers and sisters, brothers and brothers, sisters and sisters.
Consequences for tax and pensions
All of the tax consequences of a Civil Partnership, as we currently know it, will extend to a mixed sex civil partnership – for example, the inheritance tax (IHT) transferable nil rate band and residence nil rate band, exempt IHT transfers and no gain / no loss transfers for capital gains tax (CGT).
The proposed extension of formal civil partnership status to mixed sex couples would definitely deliver a benefit to the survivors of pension scheme members. The exact nature of survivors’ benefits is subjective and varied by scheme and by category of survivor. The key point though is that survivors’ benefits, whatever their exact form, will be available to a wider range. Good for the survivors in mixed sex civil partnerships, but the corollary is that there will be additional cost and potential funding implications for the schemes affected.