By Margaret Simpson, Partner
Now that we are well into the new calendar year, it is important for those couples going through separation or divorce to keep a close eye on the financial year end with a view to saving in tax upon transfers of assets.
Transfers of assets between individuals will often be subject to a capital gains tax charge based on a percentage of the gain made on the assets between the date they were acquired and the date of the transfer.
Not so with married couples.
If a married couple chooses to transfer property or other assets, such as shares or investments, from one spouse to the other, the transfer is on a ‘no gain, no loss ‘ basis. No Capital Gains Tax is payable at that point by the person making the transfer – or by the recipient.
This is a very important consideration when advising couples on marriage breakdown so that the window of opportunity is not lost.
Often, when considering a financial settlement between the divorcing or separating couple, assets may have to be transferred from one to the other. For example, the wife may hold shares in the family business which the husband is going to retain. There may be investments, farming or other property in their joint names which one party is going to keep. It is vital that proper consideration is given to the timing of these transfers if a capital gains tax charge is to be avoided. The rules allow the tax free transfers to take place between spouses whilst they are together or following separation, provided the transfers are completed within the financial year of separation – ie on or before 5 April.
If a couple is separating at the beginning of March this window will only be open for about four weeks or so. If the couple separate in the middle of April they have almost 12 months to sort out the transfers and complete them within a tax efficient way. Some people believe that provided the marriage has not been dissolved upon the pronouncement of the Decree Absolute and they are still married, the relief from tax is still available to them even after the tax year of separation has passed. This is not the case.
As 5 April 2019 will soon be upon us, it is important that all divorcing and separating couples seek advice on this important provision.
It is important to take specialist advice for what can be a complex issue.
This blog first appeared as Margaret’s monthly column in the Yorkshire Post’s Country Week supplement.
Margaret has significant expertise in complicated financial matters you can contact her on 01748 900 888 or visit www.silkfamilylaw.co.uk. You can follow Silk Family Law on Twitter @Silkfamilylaw