Under current legislation when chargeable assets are passed between spouses, they are treated as passing at ‘no loss/no gain’ which means there is no tax to pay. In the year of separation (i.e. the year in which a couple cease living together as husband and wife) the same rule is applied, so no capital gains tax is payable.
From 6th April following separation, however, the inter-spouse rules cease and any assets being gifted between the couple are treated as passing at open market value. This can lead to a capital gains tax liability for the donor. Therefore if you separated from your wife in the current tax year and if the property is transferred into her name before 5th April, no liability will arise. On the other hand, if you separated before 6th April 2011, or if the property is not transferred before 5th April this year, you may have a capital gains tax liability to settle.
If there is a gain chargeable to tax and it occurs between now and 5th April, any tax due will become payable on or before 31st January 2012. On the other hand, if the transfer takes place on or after 6th April this year, any tax due will not become payable until 31st January 2013.
When selling or transferring property, there are many things to take into consideration with regard to the capital gain computation, especially with regard to allowable costs and various reliefs that may be available. You should therefore seek professional advice in connection with this and any other assets being transferred as part of your divorce.
By Jo Nockels
Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.