The Civil Partnership Act

The Civil Partnership Act 2004 received Royal Assent last November, and came into force on 5 December 2005.

The legislation will create a new legal status of 'civil partner', for same-sex couples who choose to register their partnership. Doing so will allow them to be treated on a consistent basis with married couples in a wide range of legal and financial areas.

Civil partners will assume both rights and responsibilities, in such areas as:

• social security
• employment and pension benefits
• tax and tax credits
• life assurance
• recognition under the intestacy rules
• access to compensation following a fatal accident
• a duty to provide reasonable maintenance for their partner and any children of the family.

Changes to the tax system

Chancellor Gordon Brown announced in the 2005 Budget that the Government would legislate to ensure that civil partners are treated the same as married couples for tax purposes. From 5 December, tax charges and reliefs and anti-avoidance rules will apply equally to married couples and civil partners.

Forthcoming changes to the system include:

Inheritance tax (IHT)
Lifetime transfers and transfers on death between civil partners will be IHT-exempt.

Capital gains tax (CGT)
Although the civil partners may own several properties, only one can be their principal private residence at any time for CGT purposes. Transfers between civil partners living together will be on a no-gain, no-loss basis.

Child Tax Credit
Individual claims for Child Tax Credit will need to be cancelled and new claims must be made.

Income tax
Civil partners will be taxed on jointly owned assets in the same way as married couples, with the right to elect that income from most jointly owned assets is taxed on a beneficial ownership basis, rather than the normal 50:50 basis.

Married couple's allowance
The married couple's allowance, which applies to married couples where one of the spouses was born before 6 April 1935, will apply to those civil partnerships that meet the age criteria.

Pension schemes
Current and future pension tax legislation will reflect the legal status of civil partners.

Settlements
The anti-avoidance Settlements legislation will be extended to include civil partners in the same way as spouses.

Stamp Duty and Stamp Duty Land Tax
The current exemptions for stamp duty and Stamp Duty Land Tax on divorce will be mirrored in the event of the dissolution of a civil partnership.

Civil partners will obtain many of the tax advantages of married couples but will also be caught by many of the rules attacking tax avoidance, including the transfer of assets abroad. They will also be 'connected persons' for the purposes of capital gains tax, and 'associates' for the company control tests.

The Government anticipates that between 11,000 and 22,000 people will register a civil partnership by the year 2010.