BBC News Online: Sisters lose European tax battle

Two elderly British sisters have lost their final battle to avoid paying inheritance tax when one of them dies.

Joyce and Sybil Burden, aged 90 and 82 respectively, have lived together in Wiltshire all their lives.

The sisters appealed to the European Court to enjoy the same tax rights as married and gay couples, which do not apply to cohabiting siblings.

In a 15-2 vote, Human Rights judges in Strasbourg ruled they did not face unfair discrimination.

But the Grand Chamber of the court upheld an earlier human rights ruling that national governments were entitled to some discretion when deciding taxation arrangements.

The sisters said the decision means that when one of them dies the other will have to sell their £875,000 four-bedroom property in Marlborough.

Assuming the house is jointly owned, the surviving sister would have to pay inheritance tax of 40% on her half of the value of the property once the £300,000 threshhold had been deducted.

This would mean paying 40% of less than £140,000 assuming no other assets were involved.

Since 1976, the sisters have written to the Chancellor of the Exchequer the day before every Budget, pleading for recognition under the tax rules as a cohabiting couple.

When the UK Civil Partnership Act of 2004 first recognised gay and lesbian couples for inheritance tax purposes, the sisters turned to the European Court of Human Rights.

They argued that the Act violated Human Rights Convention articles outlawing discrimination and guaranteeing the "protection of property".

'Fundamentally different'

In 2006, the Burdens lost the case by a 4-3 majority, although three members of the court described their inheritance tax plight as "awful" and "particularly striking".

But the appeal hearing on Tuesday, before a larger panel, produced a more decisive 15-2 majority against the sisters.

The judgment said: "The absence of such a legally-binding agreement between the applicants (the Burdens) rendered their relationship of co-habitation, despite its long duration, fundamentally different to that of a married or civil partnership couple."

The ruling marks the end of the road for the sisters' legal bid.

After losing the first human rights case in 2006, Joyce Burden commented: "If we were lesbians we would have all the rights in the world. But we are sisters, and it seems we have no rights at all."

Matthew Elliott, chief executive of the TaxPayers' Alliance, said: "Inheritance tax is an unjust and unfair levy that hits bereaved families when they are at their most vulnerable.

"Whilst these brave sisters have lost this battle, the strength of public opposition to inheritance tax is growing all the time and we are getting closer to winning the war and abolishing it altogether."