The Government has published proposals to change the rules that apply to transfers of assets between spouses and civil partners who are in the process of separating. The draft legislation (published on 21st July 2022) will give divorcing couples an extended window to transfer assets without incurring capital gains tax liability.
What is the current position?
Currently, there is a ‘no gain, no loss’ window in which spouses can transfer assets to others without incurring capital gains tax. However, this is only the case if the transfer occurs within the tax year following the parties’ separation.
This places artificial pressure on those who separate close to the end of the tax year – giving some just months to organise all of their assets.
What is the change?
It is proposed to introduce legislation via a Finance Bill in 2022-23 that will provide that:
- separating spouses or civil partners be given up to three years after the year they cease to live together in which to make no gain or no loss transfers
- no gain or no loss treatment will also apply to assets that separating spouses or civil partners transfer between themselves as part of a formal divorce agreement
- a spouse or civil partner who retains an interest in the former matrimonial home be given an option to claim Private Residence Relief (PRR) when it is sold
- individuals who have transferred their interest in the former matrimonial home to their ex-spouse or civil partner and are entitled to receive a percentage of the proceeds when that home is eventually sold, be able to apply the same tax treatment to those proceeds when received that applied when they transferred their original interest in the home to their ex-spouse or civil partner.
If enacted, the changes would apply to disposals on or after 6 April 2023.
Capital Gains Tax Lawyers
This is a welcome change as it has removed the pressure that the previous CGT rules imposed on separating couples and allow them sufficient time to reach a fair settlement with time for implementation.
Finances on divorce can be complicated, and we recommend you seek legal advice. Please get in touch with our family law team who will be able to advise you further. Call 01483 451 900 (Guildford) or 020 7421 9421 (London), email sols@gordonsols.co.uk or fill in this contact form and we will get back to you.