Two sisters in their eighties who have lived together all their lives have lost their legal challenge against UK inheritance laws that deny them the same rights as married or same-sex couples.

Under UK tax laws, when either Joyce, 88 or Sybil Burden, 80, dies the surviving sister will face a large inheritance tax bill on their jointly owned property.

When the 2004 Civil Partnership Act extended to gays and lesbians the same exemption from inheritance tax already enjoyed by married couples, the sisters began a legal bid to qualify for the same exemption.

But this morning the European Court of Human Rights (ECHR) ruled that the 2004 change does not cover family members living together.

In a majority 4-3 ruling against the women, the court found that the UK inheritance laws did not breach the Human Right Convention’s safeguards against discrimination and "protection of property".

The sisters, who share an £875,000 house in Wiltshire, appealed to the ECHR claiming that their exposure to inheritance tax breaches their human rights after the UK tax authorities refused their request for an exemption.

Lawyers for the women argued that unmarried sisters living together for as long as the Burdens - since birth - warrant the same treatment for inheritance tax purposes as either category.

The Government had argued that the sisters’ claim to be in a similar position as co-habiting married and civil partnership couples was wrong because the sisters were connected by birth rather than by a decision to enter into a formal relationship recognised by law.

The judges accepted the Government’s case that the inheritance tax exemption for married and civil partnership couples had a legitimate aim, "namely to promote stable, committed heterosexual and homosexual relationships by providing the survivor with a measure of financial security after the death of the spouse or partner".

Jonathan Conder, head of the private client department at law firm Macfarlanes, said: "It's a bit rich for the Government to rely on this ‘legitimate aim’ as the basis for different treatment when for income tax purposes they have systematically eroded the benefits afforded to married couples."

Other lawyers welcomed the ruling. Richard Hogwood, a private client solicitor at Speechly Bircham, said: "Had the sisters won then the Government would have had the unenviable task of considering how to set the limits to the exemption. What if the Burdens had only been cousins or had lived together a shorter period of time or were younger?

"While I have sympathy with the sisters, I am nevertheless pleased that this particular Pandora's box will remain shut for now."

The Government could have granted the inheritance tax concessions on a different basis, but the central issue for the human rights rules was whether the scheme actually chosen by the legislature "exceeded any acceptable margin of appreciation".

The judges said the Government "could not be said to have exceeded the wide margin of appreciation afforded to it and that the difference of treatment for the purposes of the grant of inheritance tax exemptions was reasonably and objectively justified".

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