Civil Partnership Overview
Couples who have signed a civil partnership are treated by HM Revenue and Customs (HMRC) the same as a married couple.
If you are considering a civil partnership talk to your IFA. On the whole, the treatment of the couple within a civil partnership will be more advantageous than that of two single people, but even so there are issues to consider.
In general if you read or hear about any financial issue that affects married couples, or couples getting married, then it probably applies to you as a couple in a civil partnership or considering one. Key areas are:-
Treated as a married couple, and, if over 65 receiving higher personal allowances.
Capital gains tax
Can pass assets between partners without charge (CGT is incurred when eventually sold to a third party, with the gain based on initial acquisition cost).
Sale of residence - married couples are only allowed one principal private residence that can be sold for a tax free gain. If you, as a couple are considering a civil partnership currently each having your own home, talk to us. Planning could save you a lot of tax in the future.
Partners will be able to inherit without incurring tax.
Civil partners will be treated as spouses, ex-civil partners as ex-spouses etc. with regard to the taxation of pensions. However this is a classic case of careful wording where what is NOT said is probably more important.
What civil partners normally want is to be treated identically to married couples for the purposes of pension scheme benefits. You have to earn benefits before you can worry about their tax treatment. Future service earns benefits, but for past service you should consult your pension scheme administrator and find out what their policy is.
Business issues and anti-avoidance
There are a range of rules that apply to married couples to prevent abuse of the tax system, and these will also apply to civil partnerships.
Most people will not be affected in practice, (because they do not have the kind of financial affairs that give rise to avoidance issues), but if you are a couple considering a civil partnership and you are in business together, or engage in financial deals together, then note that your civil partner might well become deemed a 'controlling director', or 'associated person' for the purposes of determining business control and transaction validity.
In particular any requirement for a transaction to be “arms length” cannot normally be met by a spouse, and so would not normally be met by a civil partner.
Certain State benefits, although claimed by one person, take the circumstances of the couple into account. If either of you is in receipt of benefits, you should seek to find out what would happen if you entered into a civil partnership.