When reaching a financial settlement on divorce or dissolution of a civil partnership, parties' will often agree to transfer assets such as the family home into one of the parties' names, they may also transfer business interests or shares.
The current law allows a property to be transferred from one spouse or civil partner to another free of any capital gains tax, on a 'no gain or no loss' basis unless they are separated. If they have separated, then the capital gains tax treatment is available only until the end of the tax year in which they become separated after which, transfers are treated as normal disposals for CGT purposes. For the purpose of the capital gains tax treatment married couples or those in a civil partnership, are treated as separated from each other if the separation is under a court order, a separation agreement or they are separated in such circumstances that the separation is likely to be permanent. If the asset is the matrimonial home, then normally the transfer will be exempt from CGT. This deadline can therefore result in further pressure for separating couples to reach an agreement at an already difficult time and if the timeframe is unachievable, can result in greater costs.
From 6 April 2023, spouses and civil partners will be given up to three full tax years in which to make what are known as 'no gain or no loss' transfers of assets between themselves when they cease to live together. It is also proposed that they are given unlimited time if the assets are part of a formal divorce agreement.
This change in the law will provide relief to separating spouses and civil partners as it will help to reduce both time and financial pressures during their separation.