Don't forget the small print - the new CGT rules

The CGT rules changed to help separating and divorcing couples and those in civil partnerships but what exactly do the new rules mean?

We have heard a lot about the new rules but what do they mean.

In essence they mean that

  1. Separating spouses or civil partners are to be given 3 years following the tax year of separation in which to make any transfers on a no gain/no loss basis. This will apply to couples who separate but do not divorce with a final financial order.
  2. If a couple have a financial agreement or order in connection with their divorce which provides for the transfer of an asset from one party to the other, this can be done at a no gain/no loss regardless of how many years have passed since they separated.
  3. A spouse who retains an interest in the family home can be given the option to claim PPR when it is sold to a third party. Previously this only applied if their interest was transferred to the spouse in occupation of the family home.
  4. If a spouse retains an interest in the family home, to be paid at a later date, such as a child turning 18 years of age, they can now apply the same tax treatment to the proceeds when they are received as they would have been able to use when they transferred their original interest to their ex-spouse. This will prevent a spouse being penalised further if they agree to postpone the sale of the family home for the benefit of their family.

The small print

  1. The date for transfer for CGT on a property is the date of exchange, not completion.
  2. If there is no contract for sale then the disposal date is the date of the declaration of trust or signed transfer (TR1).
  3. If a financial order is made before decree absolute/final order, the date of disposal will be the date of the decree absolute or final order. If decree absolute/final order has already been made the date of disposal is the date of the court order.
  4. These rules do not apply to couples who cohabit outside of marriage or civil partnership.

Important

It is important to remember that the transferee is taking the assets with an inbuilt gain. The gain will not be wiped out altogether, it is merely postponed. So, when sharing assets on divorce or dissolution, that potential tax charge needs to be remembered for the future and the usual calculations done to calculate the net value for relevant assets.

In mediation we can involve tax experts to help couples understand these rules and how they may impact on the decisions they make about how to share their assets.

If you are interested in finding out how mediation can help you reach an amicable agreement, reduce costs and stay out of court book a free call on our website or call us on 0800 206 2258 or send an email to hello@familymandm.co.uk.

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