Tax Discrimination

March 8th 2017

Joyce and Sybil Burton, sisters in their late 80’s, hit the headlines in 2006 having lost a case against the Government. They had lived together all their lives but realised that on the first death there would be a substantial amount of Inheritance Tax on their home and thought that this was unfair.  Married couples and same sex couples in civil partnerships were entitled to surviving spouse exemption and they were not.  Predictably they lost.

Just recently this spectre of unfairness was raised again in the case of Rebecca Steinfeld and Charles Keidan, a heterosexual couple who co-habit, who wanted to enter into a civil partnership and were told that they couldn’t.

It is a fact that Inheritance Tax, since it was born in the mid-80’s has discriminated, principally in favour of married couples, latterly in favour of married couples and same sex couples so long as they had a piece of paper, either a marriage certificate or a civil partnership.  If siblings co-habit or heterosexual couples co-habit they can’t obtain one of those pieces of paper, and so feel the full weight of the tax burden.

It would appear, following the Steinfeld : Keidan case, that the Government is well aware of the issue but seems very reluctant to do anything about it as yet, adopting their preferred “wait and see” stance.  This is not particularly helpful, particularly in light of the fact that we are encouraged that we are all in this together and should all be treated fairly.  

So in essence the Inheritance Tax Act 1984 was flawed from the start, if one considers that discrimination is a flaw, which I suspect most of us do.  I don’t think many people object to paying tax if it is fair and applies to everybody, and if Governments could be persuaded to stop wasting it.  

Sadly, this Government has now introduced even more discrimination into Inheritance Tax.  In March 1986 the nil rate band, enjoyed by everyone, was £71,000 and this was increased over the years, but not by much, until 2009 when it hit £325,000 and stayed there, firstly thanks to Mr Brown and then Mr Cameron.  

One would think that the fair way to deal with the nil rate band, indeed the only way to deal with a nil rate band, would be to increase it, because it is simple, obvious and everybody wins.  However, that appears to be too easy, and so in one of his last acts the then Chancellor, George Osborne, decided that discrimination was the order of the day and has introduced the “residence nil rate band”. 

The residence nil rate band

Briefly, the residence nil rate band applies if:

  • The individual dies on or after 6 April 2017.
  • Owns a home or a share of one that is included in their estate and their direct descendants inherit the home or a share of it.
  • The estate is not more than £2,000,000.

The object of the exercise is to increase the residence nil rate band so that a married couple or a couple in a civil partnership with transferrable nil rate bands would have a total of £1,000,000 in the tax year 2020/2021, and so the increase will be incremental.  A couple who are married or in a civil partnership, (see above) will have two nil rate bands totalling £650,000 and if they meet the criteria, an additional £350,000 for the residents nil rate band.

Who does not qualify for the residence nil rate band?

  • If you don’t own a property you cannot qualify.
  • If you don’t have direct descendants, defined by HMRC as children, a grandchild or other lineal descendants, a step-child, an adopted child, a child who was fostered or a child where the individual is appointed as a guardian or special guardian when the child is under 18, then you don’t get the benefit.
  • If you have a property and a child, but don’t leave it to them, you don’t get the benefit.

What we now have is a government deciding how wills should be drafted.  Private client practitioners are all too well aware of many situations where it is simply not appropriate to leave a property to a child.

Whichever way you look at it, this is discriminatory and tax legislation should not be discriminatory.  All of that could be avoided by increasing everybody’s nil rate band.

There is a press release from the Revenue, should you wish to read it, which goes into some detail and runs to about 13 pages and attaches some 18 case studies

Just to add insult to injury there is, believe it or not, an Office of Tax Simplification.  They are part of HM Treasury and, according to their website, they give independent advice to the Government on simplifying the UK tax system.  When researching this I discovered that they have 3 vacancies.  I am seriously thinking of applying…

With over 35 years experience as a private client solicitor, David Endicott’s principle areas of expertise includes wills, trusts, probate, personal tax and tax planning.  If you would like to discuss this issue or any other matter, please contact David on 01295 204023 or by email at

*Disclaimer: While everything has been done to ensure the accuracy of the contents of this article, it is a general guide only. It is not comprehensive and does not constitute legal advice. Specific legal advice should be sought in relation to the particular facts of a given situation.