Following new draft legislation published by the government last month, divorcing couples will soon have an extended window of time in which to transfer assets between themselves without incurring capital gains tax (CGT) charges.
The new rules, scheduled to come into force on 6th April 2023, will give married couples and civil partners three years in which to transfer assets (e.g. property, shares or business assets) under what is known as the “no gain, no loss” window. This means that the transfer would not incur any CGT even though the recipient has technically gained an asset.
This is a significant extension of the current rules which only gives couples until the end of the tax year in which they separate to transfer assets without incurring CGT liability.
For those couples which have made the asset transfer part of a formal divorce agreement, the “no gain, no loss” treatment will continue indefinitely and these couples will essentially have an unlimited period in which to organise their assets.
Experts and commentators have welcomed the new legislation which should alleviate some of the stress and pressure on separating couples, particularly those with complex finances who, under the current system, can find themselves racing to finalise the division of assets before the end of the tax year instead of taking time to negotiate a considered settlement.
Further tax changes which have been announced in the draft legislation include:-
- a spouse or civil partner who retains an interest in the former matrimonial home will be able to claim private residence tax relief when it is eventually sold on; and
- individuals who transfer their interest in a property to an ex-partner will get the same tax treatment when it is sold as when they transferred the interest.
All of these changes will form part of the Finance Bill 2022-23.
For more information about divorce proceedings, the resolution of the matrimonial finances and asset transfers, please do not hesitate to contact Catherine Lowther (cel@swinburnemaddison.co.uk) or Kath Hill (kh@swinburnemaddison.co.uk) by email or by phone on 0191 384 2441.
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