The government has announced plans to extend civil partnerships to opposite sex couples in England and Wales. A consultation has also been launched by the Government Equalities Office to gauge public opinion on whether married couples can convert into a civil partnership, and then bringing all conversion rights to an end. The government’s aim is for civil partnerships to be available to opposite sex couples by the end of 2019.
The effect of entering into a civil partnership versus getting married is very similar. As to whether a couple would prefer to enter into a civil partnership rather than get married will be a personal choice based on their own preferences. There has been significant controversy questioning whether opposite sex couples have been the subject of discrimination by not being able to enter into a civil partnership thus far.
Both married couples and civil partners are taxed independently on their own income, and any gains. Income from jointly owned assets are deemed for tax purposes to belong to the parties equally, whether or not that is accurate. It is possible to declare the accurate beneficial ownership and be taxed accordingly. However, the declaration cannot be used as a way of maximising tax efficiency, as the declaration must reflect the true beneficial ownership. However, there is no obligation to make such a declaration, and even if the married couple or civil partners own assets jointly in unequal shares they can continue to be taxed on the basis that they own the assets equally if they prefer.
It is possible for both married couples and civil partners to transfer certain assets between them free of Capital Gains Tax, including pensions. It is advisable to seek tax planning advice during the year of separation, and also during the subsistence of a marriage or civil partnership to enable efficient tax planning to make the best use of individual losses.
A family home is usually exempt from Capital Gains Tax when it is sold, and transfers of assets between UK domiciled married couples or civil partners are free from Inheritance Tax and it is possible for both to “inherit” unused nil-rate band from their deceased spouse or civil partner.
The procedure of separating from a marriage or civil partnership follows the same process through the Court with just the terminology being different. Financial relief on exiting a marriage or civil partnership is the same. It therefore follows that a couple entering a civil partnership should consider whether a Pre-Nuptial Agreement is appropriate in the same way as when entering a marriage.
It will be interesting to see following the change in legislation whether opposite sex couples take the opportunity to enter into civil partnerships rather than a traditional marriage.
For advice in relation to pre-nuptial agreements, divorce or dissolution of civil partnerships, contact Madeleine Young on 0118 955 9616 or firstname.lastname@example.org
Published on 21/08/2019