Capital gains Tax after divorce

I separated from my husband 1/01/2019 and divorced 26/03/2020 we owned 2 houses I remained in the family home and he moved into the other house that we both previously lived in together as a couple. In 2020 he completed a TR1 form and transferred the family home into my sole name, I remained jointly on the deeds and mortgage for the other house. Agreed a consent order this week made formal in court. He is to pay me a lump sum and I will be removed from the mortgage and sign TR1 for transfer of the second property into his name. He is not selling the 2nd home and is paying the lump sum from savings. My question is am I liable to pay capital gains tax on this lump sum, i have looked at all the pages on HMRC site and forum and am very unclear. I have also looked at the new rules and still don't understand my position. Thanks for any advice.

Hi,

Spouses are connected persons under TCGA92/S286 (2),  so transfers of assets between two spouses would normally be deemed to be considerations equal to market value at the date of transfer.

For a transfer that takes place in a tax year of assessment during which the spouses have lived together at some point, the Market Value rule is over ridden by TCGA92/S58. This means that  the transfer of the asset can be treated as having  taken place at no gain/no loss. CG10790 Provides the links to relevant guidance on this matter.

When spouses or civil partners separate, no gain or no loss treatment is only available in relation to any disposals for the remainder of the tax year in which the separation took place. After that, transfers are treated as normal disposals for Capital Gains Tax purposes.

CG22423 advises regarding the transfer of an asset in pursuance of a court/consent order made after the date of the decree absolute. The deemed date of disposal is the date of the order.  

Therefore, on the basis of the info provided, the date of disposal of the 2nd property would be the date of the consent order. If that is after 6 April 2023 then the new rules and extended time frame in which to apply No gain/ No loss will apply.                                                                                                                                                  
If it is before 6 April 2023 and not in the year in which they separated then normal CG rules will apply and you  will be deemed to have disposed of their 50% share of the property at market value on the date of the consent order.                                                                    
You can then apply the normal CGT calculation process and claim 50% of cost of acquisition, incidental costs of acquisition and sale and any Private Residence Relief due for any periods in which you resided in the property as your main residence.

New rules for disposals will be introduced  after 6 April 2023. The new rules will provide that:

1. separating spouses or civil partners will be given up to three years after the year they cease to live together in which to make no gain/no loss transfers
2. no gain or no loss treatment will also apply to assets that separating spouses or civil partners transfer between themselves as part of a formal divorce agreement
3. a spouse or civil partner who retains an interest in the former matrimonial home will be given the option to claim Private Residence Relief (PRR) when it is sold
4. individuals who have transferred their interest in the former matrimonial home to their ex-spouse or civil partner and are entitled to receive a percentage of the proceeds when that home is eventually sold, will be able to apply the same tax treatment to those proceeds received when they transferred their original interest in the home to their ex-spouse or civil partner

CG10790 - Spouses and civil partners: dealt with separately                                          

Thank you.
 

Hello, Are the new rules for disposals for divorcing couples for PPR and nil gain - nil loss transfers in place now or do they have to be enacted first? If they are in place now when will the HMRC manuals be updated?

thank you for the response I have found the following information on a legal website and ask please if you could confirm that this is in fact correct please as this scenario is identical to mine including timeline dates, my court order is being signed off by the Judge tomorrow 27th April 2023 in a court hearing. - • Scenario B - A married couple separated in January 2018. They could not agree the division of their assets so instructed solicitors to issue court proceedings. There are several assets involved and a number of valuations and reports have had to be obtained. This, coupled with the delays caused due to Covid-19 has meant that their case has still not been concluded. If their case does not conclude until after April 2023 then the new tax rules will be in force and any transfers made between them will be subject to the ‘no gain, no loss’ rule. A formal divorce separation that transfers assets between spouses is not restricted to the new three-year rule.

thank you for the response I have found the following information on a legal website and ask please if you could confirm that this is in fact correct please as this scenario is identical to mine including timeline dates, my court order is being signed off by the Judge tomorrow 27th April 2023 in a court hearing. - • Scenario B - A married couple separated in January 2018. They could not agree the division of their assets so instructed solicitors to issue court proceedings. There are several assets involved and a number of valuations and reports have had to be obtained. This, coupled with the delays caused due to Covid-19 has meant that their case has still not been concluded. If their case does not conclude until after April 2023 then the new tax rules will be in force and any transfers made between them will be subject to the ‘no gain, no loss’ rule. A formal divorce separation that transfers assets between spouses is not restricted to the new three-year rule.

Hi Eleanor Worby,

The bill has only had its1st reading and still needs to go through normal parliamntary processes.
The guidnace will be updated once approved.
However, the rules still apply for disposals on or after 6/4/23.
Capital Gains Tax - separation and divorce

Thank you. 

Hi CDH,

I regret that we cannot comment on scenarios.  

There is a help sheet here:

HS281 Capital Gains Tax civil partners and spouses (2023)

 Further guidance can also be found in the capital gains manual onwards. 

CG22400P - Capital Gains manual: individuals: transfer of assets between spouses or between civil partners: transfers of assets following permanent separation, divorce or dissolution: Contents
 
If you still unsure, you may wish to seek the advice of a financial adviser.

Thank you. 
 

Hi,

As you have been separated for more than 3 years, documentary evidence will need to be supplied on the assets that have been transferred as part of the court order to ascertain the no gain no loss applies under the new rules

Thank you.

My scenario Separated for over 3 years Date of decree absolute 21 12 22 Date of Consent Court order given by the Judge was 10 August 2023, which states I am to hand over the matrimonial home to my ex wife Is this consent court order classed as the disposal Date for HMRC purposes? And Do I need to send a letter and evidence to HMRC to show there is no Capital Gains to pay? If so, what letter end evidence do I need to send and to what address? And is there a deadline date to send this information to HMRC? Thank you

Hi Paul Ap,
Yes, the court order will be the date of transfer.
You would also need to confirm the actual date of separation as it is this date that is taken into account and not the date of decree absolute for Capital Gains Tax. purposes.
Separating spouses or civil partners be given up to three years after the year they cease to live together in which to make no gain or no loss transfers.
Thank you. 
 

Thank you for your reply. However, I thought that the new legislation from 6 April 2023 gives unlimited time from the time of separation up to the date of the court order, WHERE that date of disposal is after 6 April 2023. Looking at the new legislation the 3 years separation rule is extended indefinitely in these types of cases. Can you please check the new legislation, confirm and clarify?

Hi,

The 2022-23 Spring finance bill received Royal Assent on 11 July 2023.   It stated that separating spouses or civil partners will be given up to three years after the year they cease to live together in which to make no gain or no loss transfers.  

See Section 1.9 of:

Spring Budget 2023 — Overview of tax legislation and rates (OOTLAR) Published 15 March 2023

Thank you.

- individuals who have transferred their interest in the former matrimonial home to their ex-spouse or civil partner and are entitled to receive a percentage of the proceeds when that home is eventually sold, will be able to apply the same tax treatment to those proceeds received when they transferred their original interest in the home to their ex-spouse or civil partner. Can you explain further what the taxes it refers to are?

Hi,

For full details of the Capital Gains Tax implications when a transfer of assets (including part ownership of a residential property) takes place between separated and divorced spouses, please refer to the guidance at CG10790.                                                                        

CG10790 - Spouses and civil partners: dealt with separately

Thank you.

My ex husband and I divorced in 2013 and a Consent Order was signed in that year. In the Consent Order it stated that my ex had purchased a property in his name that I would live in it. In the Consent Order it is referred to as the "Investment Property" and he used a Buy To Let mortgage to finance it. I was to purchase the property from him when I could get a mortgage of my own or he would sell the property and pass over 100% of the proceeds to me. I have paid the mortgage to his personal account this entire time and it has been my main residence since the divorce. My question is if he sells the property now, will he have to pay CGT on the proceeds?

Hi,

You can find guidance here:

CG22410 - Transfer of assets: between spouses or between civil partners: separation, divorce or dissolution: date of disposal

Thank you.

Hello there, My husband and I are separated and he left our matrimonial home on the 18 December 2021. It has been less than 3 years and we have now started the process of the formal divorce. With the new rule for capital gains tax (after 6/4/23), does my divorce need to be completed before 3 years since he left our home to avoid paying capital gains tax?

Hi Bethania,
It applies from the separation - please refer to Capital Gains Tax: separation and divorce
Thank you.

We are going through divorce. Will I be liable for capital gains tax when my ex buys me out of the property if our divorce has been finalised?

Hi,

Please refer to:

CG22400 - Transfer of assets: between spouses or between civil partners: separation, divorce or dissolution

Thank you.