Couples who decide to form a civil partnership under new laws coming into effect this December will find themselves in a relationship with many similarities to a married couple - and no more so than when it comes to their tax situation,’ says Steve Screech, Associate Tax Director with Broomfield and Alexander.

‘For tax purposes, the Civil Partnerships Act will treat same sex couples who enter into a formal civil partnership in the same way as a married couple, and that means for the first time having to think about their tax affairs from the point of view of a single entity of two people, rather than as two separate individuals.’

They say that assessing and planning for this new opportunity is essential to minimise the losses and maximise the gains. ‘A number of key areas will need to be examined and professional guidance will not only enable couples to understand the existing intricacies of tax, but how their new civil partnership status will affect things. With this kind of input, decisions can be taken earlier rather than later - ideally before the couple formally enters the civil partnership - so that the right options can be chosen for the individuals concerned.

A wide range of tax issues will be relevant to a new same sex couple. For example, the special rules which apply to husbands and wives which prevent them avoiding tax by transferring income to the spouse who pays less tax will also apply to civil partners.

‘Many couples will own their own separate homes, even if they live together. In a civil partnership, only one property owned by a couple, whether solely or jointly, can be treated as the principle private residence. So a careful review will be necessary to establish which home should be treated as the main residence and which will be liable for Capital Gains Tax.

Some couples may also be affected by the tax laws governing businesses - notably corporation tax. The law currently deems a company to be under the control of a person if it is controlled by an associate of that person; the term ‘associate’ includes husband or wife, and will also now include civil partner, so companies owned by the individual partners will become associated on registration of a civil partnership.’

And finally, any wills made before the registration of a civil partnership will become redundant, but the benefit will be that any assets transferred on death of one partner will not be subject to inheritance tax.

Agreements.co.uk, the London barristers and solicitors network and law firm, says gay couples should consider ‘prenups’ before taking vows

‘The Government conservatively estimates that 22,000 gay and lesbian couples will get hitched by 2010,’ they say, ‘reflecting equal recognition for same sex partnerships and a victory for human rights. However these new rights, which become law just in time for Christmas 2005, also bring alarming new responsibilities for gay and lesbian couples identical to those experienced by heterosexual married couples.

According to Agreements.co.uk, lesbians and gay men entering into civil partnerships don’t realise what’s about to hit them: in the event of a break-up, the wealthier partner could stand to lose up to half of everything s/he owns – even future earnings and pensions will be in the courts’ sights. Agreements.co.uk maintains that gay couples should seriously consider a prenup where there’s an inequality of wealth, to safeguard against these costly future settlements.

Mark Andrew, contracts coordinator, explains: ‘Civil partnership is an enormous step in the right direction for gay and lesbian couples, providing rights that previously never existed relating to tax, inheritance and pensions, etc. However, while this victorious step is still being celebrated, we should bear in mind that more marriages are now splitting up, and more rapidly than ever before. Almost one in every two straight marriages in the UK will fail, and our nation has the highest divorce rate in Europe. The reality of the situation will only really start to hit home when they see their gay friends forced to put their houses on the market to pay massive, legally sanctioned awards to their previously less well off exes.’

Gay and lesbian couples tend to have higher disposable incomes than their heterosexual counterparts, as they rarely have dependents to fund. On the dissolution of a civil partnership, this makes dividing up their assets a straightforward matter for the family law courts. In divorces, the law courts are increasingly awarding up to 50% of the wealthier partner’s material wealth to the less well-off partner, irrespective of whether s/he has made any contribution to it.

‘Even living well during the civil partnership can set up an entitlement to continue the ‘high life’ as a single person after the split. As Lord Justice Thorpe recently commented in the High Court, the poorer partner has “a legitimate entitlement to a long-term future on a higher plane of affluence.” ’

For more information, consult a solicitor.