It has been proposed and we are still awaiting confirmation from the 2022 Finance Bill, that new beneficial rules will be introduced for divorcing couples from 6 April 2023.
This will allow more time for tax beneficial inter-spousal or civil partner transfers to occur.
Currently, separating spouses or civil partners can transfer chargeable assets, tax-free, in the tax year of separation. This can be a very short window, if for example, as with Den and Angie, separation occurs on Christmas Day.
Under the new rules, couples will have:
- until 3 years in which to make no gain no loss transfers, if after 5 April 2023; or
- an unlimited period if part of a formal divorce agreement; or
- a partner who retains an interest in the former matrimonial home, the right to claim principal private residence relief when sold; and
- a partner who retains a right to proceeds from the sale of the former matrimonial home, the option to be taxed as it had been at the time of transfer.
At Lambert Chapman LLP, we work with many divorcing couples and solicitors to provide guidance and advice in relation to the transfer of property for financial settlements and Court Reports. Although this new legislation, if introduced, will help to reduce this burden, it only affects inter-spousal and civil partner transfers and so any disposals to third parties or on the open market will still have a tax position.
Remember, the disposal of a UK residential property with a resulting tax liability has to be reported to HMRC within 60 days of completion and the tax paid.
At Lambert Chapman LLP we are happy to discuss matters with you to see what advice we can offer. Please contact Lucy Orrow for more information.
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.