The relevance of the impending budget on separating and divorcing couples, learn from leading law firm
In anticipation of the Budget and given the uncertainty of its provisions, in some cases I have decided that it is appropriate to defer moving to a settlement of a party’s financial claim on separation or divorce, until such time as the effects of the Budget are known.
In advising our clients as to the appropriate settlement following separation or divorce, it is vital that we understand fully not only the value of the assets (property, land, farming assets etc) but the net value of their overall position taking into account costs of sale and Capital Gains Tax arising upon transfer or disposal of that asset.
In terms of Capital Gains Tax, spouses or civil partners are able to transfer assets between them without incurring an immediate CGT liability.Such a transfer is said to occur at ‘no gain no loss’.Where parties are divorcing, those parties have up to three years after ceasing to live together as partners to transfer assets on a ‘no gain no loss’ basis.
If, as part of a divorce settlement, a wife transfers to her husband her interest in land or property, she will not incur a CGT charge at the point of transfer or subsequently.However, the husband will receive the asset at the wife’s base cost and in the event of eventual disposal, sale or other transfer of that land or property, he will have Capital Gains Tax to pay on the total.Accordingly, it is vital that a proper assessment of all Capital Gains Tax that arises upon eventual disposal is made prior to parties reaching an overall settlement so that the net position of the parties is known.To do otherwise could result in the party receiving the assets having a latent or deferred liability to Capital Gains Tax which may not have been taken into account in the structure of the settlement.
Given the current uncertainty and the imminence of the Budget, there is unlikely to be any material detriment to the parties in waiting until any changes to the tax regime are announced so that an overall financial settlement can be negotiated, and hopefully agreed, against the background of full information.
For more advice and guidance please contact Margaret Simpson at Silk Family Law on 01748 900 888 or visit www.silkfamilylaw.co.uk.