Peers urge inheritance tax reform

Peers in the House of Lords have called on the government to reform inheritance tax laws to exempt cohabiting siblings.

The issue was raised at question time after two unmarried elderly sisters, living together in Wiltshire, failed in their battle to avoid paying the tax.

Joyce Burden, 90, and Sybil Burden, 82, appealed for the same rights as married couples and civil partners.

Responding to the calls, Lord Davies of Oldham, for the government, said the line "had to be drawn somewhere".

Dispossessing people

Crossbencher Baroness Deech said: "Will the Government now consider doing justice to elderly sisters who live together and to children who care for elderly parents in the same house, by allowing through legislation for the inheritance tax to be deferred until the death of the second relative."

Labour's Baroness Hollis of Heigham said death duties should be rolled over "so they are not necessarily paid until the second death, thus allowing the elderly sister, for example, to remain in that home until death."

Lord Davies of Oldham said HM Revenue and Customs was "not in the business of dispossessing people of their homes".

He told peers: "The line has to be drawn somewhere and at the present time the line is drawn in terms of spouses and civil partnerships.

"Wherever the line is drawn there will be difficulties and there will be costs to the exchequer if the exemption is extended and it should be recognised that only four per cent of estates pay inheritance tax."

The sisters jointly own a four-bedroom property in Marlborough, valued in 2006 at £550,000, with its adjoining land, according to court papers.

If one dies, the surviving sister would have to pay inheritance tax of 40% on the value of the inherited half of the properties, once the £312,000 threshold had been deducted.

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