The Financial Conduct Authority (FCA) does not regulate activities such as will writing, inheritance tax, trust planning, estate planning, and tax planning.
Understanding Taxation
Our current understanding of taxation legislation and regulations shapes this taxation information. However, keep in mind that levels, bases, and reliefs from taxation can change.
Civil Partnerships in the UK
The Civil Partnership Act 2004, amended in 2019, allows both same-sex and opposite-sex couples in the UK to form civil partnerships, granting rights and responsibilities similar to marriage. Initially exclusive to same-sex couples, the Act now includes opposite-sex couples as well. Despite the legalization of same-sex marriage in March 2014 in England, Scotland, and Wales, civil partnership remains an option, providing similar rights and obligations.
For legal recognition under this new law, couples must register their civil partnership. This requires a declaration of intention at least 28 days before registration in England and Wales, in front of a Civil Partnership registrar and two witnesses. It’s vital to note that both parties need to be single, and those previously married must obtain a divorce.
Dissolution and Wills
Civil Partnerships can dissolve similarly to a divorce, but only after a year. Registration automatically revokes any Will under the law of England and Wales and Northern Ireland, but not in Scotland. Intestacy rules that protect a spouse now equally protect a registered Civil Partner.
Scope and Tax Implications
The legislation affects various aspects of financial planning, including intestacy, insurable interest, and various tax considerations. The ‘spouse’ exemption in Inheritance Tax (IHT) now extends to registered Civil Partners, potentially rendering some existing IHT planning like single life policies unnecessary.
Asset Transfer and Gifting
Transfers of assets between Registered Civil Partners are exempt from CGT at the point of transfer, similar to spouses. This enhances effective IHT and income tax planning. Couples need to review pre-owned asset tax (POAT) arrangements, as these charges no longer apply to Registered Civil Partners.
International Considerations
The recognition of Civil Partnerships varies internationally, so couples must check their partnership’s validity with every change of residence.
Potential Downsides
Registering a Civil Partnership may result in losing CGT exemption on one partner’s home and necessitates choosing one principal residence within two years of registration. Anti-avoidance laws may apply to certain pre-registration arrangements.
Marriage Law
It is now legal for same-sex couples to marry in the United Kingdom.
This interpretation of current and proposed legislation and HMRC practice may change in the future. As the FCA does not regulate Taxation advice, Inheritance Tax Planning, or Will Writing, it’s advisable to seek specialized guidance in these areas.
