Family Department - Civil Partnership

The Civil Partnership Act came into force on 5 th December 2005. The Act will enable same-sex couples to obtain legal recognition of their relationship. Couples who form a civil partnership will have a new legal status, that of the “civil partner”.

In order to form a civil partnership couples must give notice at least 15 days between giving notice and any ceremony taking place. A civil partnership can be formed in England and Wales at a register office or an appropriate premise. A ceremony is not actually required as part of the formation procedure.

Anyone entering into a civil partnership should seek legal advice beforehand. It is marriage by another name, so that those who enter into it can expect the same rights and responsibilities and also the same legal consequences as a marriage between a man and a woman. It will be just as difficult and expensive to dissolve a civil partnership as it is to go through a divorce.

Tax Benefits

Under the Civil Partnership Act, couples can expect the same exemptions from Inheritance Tax as husbands and wives. Assets can pass to the other partner with no tax to pay on the death of the first partner. However, couples who do not enter into a civil partnership will be liable to pay inheritance tax at 40% if their assets at the time of death exceed £275,000. The inheritance tax exception will obviously help those who have built up a long relationship and are financially independent. Same sex couples will be treated in exactly the same way as married couples. Couples can enjoy the same workplace benefits and eligibility to survivor benefits under pension schemes, which include public services.

Potential problem areas

Capital Gains Tax

Under the status “civil partner”, gay couples are treated as a married couple insofar as capital gains tax liability is concerned. Therefore, if they own more than one family home, they are liable to pay CGT on profits exceeding 8% this year. In order to avoid this pitfall, couples need to be advised to consider selling one of their houses before entering into a civil partnership. In order to take full advantage of CGT free transfers, couples should look to redistribute remaining assets between themselves, once they have entered into a civil partnership.

Wills

Marriage, including a civil partnership, has the effect of making any previous Will null and void. Therefore to avoid the rules of intestacy resulting, a new Will should made.

Corporation Tax

Corporation tax implications will come into effect for couples who run separate businesses. Previously the couple would be considered as owning separate businesses, but under a Civil Partnership the businesses will be deemed to be connected. This has the effect of halving the allowance for the low rate for each firm.

Although civil partnerships are now recognised in England and Wales, this recognition may not apply abroad.