New Clause 6 - Transfers of real property between joint occupiers

Part of Finance Bill – in a Public Bill Committee at 11:15 am on 24th June 2004.

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Photo of John Healey John Healey The Economic Secretary to the Treasury 11:15 am, 24th June 2004

We all share sympathy for those people who have lost a companion with whom they have lived, but I cannot support the new clause.

The hon. Gentleman mentioned two situations: same sex couples; and couples who do not live together as cohabiting couples but share a residence. In the first situation, I recognise that the exemption from inheritance tax for the transfer between spouses is not an option for same sex couples. We are changing that by legislating for civil partnerships, and we have made it clear that all civil partners will be treated for tax purposes consistently with married couples. We will legislate for that at the next available opportunity. It makes sense to do so.

The Civil Partnership Bill is still before the House and has not been enacted. All hon. Members will have recognised over the past few weeks that a change to

one part of the tax system can often have much wider ramifications, so it makes sense to deal with a package of reforms in one go and to implement the tax commitments that flow from the legislation once it has been passed.

In many cases, adults who share a household without living together as partners do not leave their property to the person with whom they share it. Where they do intend to leave it, they have the same opportunity as unmarried couples to minimise the impact of inheritance tax by dividing the ownership in their joint lifetime. In those circumstances, IHT is not an issue unless the shared property is worth more than £500,000.

The IHT rules have already recognised in principle that people inheriting big illiquid assets, such as a house, can have difficulties meeting tax bills up front. Where the property remains unsold, the provision exists for tax to be paid in instalments on generous terms with an attractive rate of interest over as long as 10 years. Many estates start paying their IHT in that way, but the great majority pay just one instalment before settling the outstanding amount in one lump sum.

Despite all the sympathy that we share with people who have lost a companion in such circumstances, that confirms to me that there is no real target for justifying a substantial cost to the Exchequer and the taxpayer of perhaps £100 million. I hope that at this point in proceedings the hon. Gentleman will not press his new clause to the vote.