Capital Gains Tax – the Year End Approaches article banner image

The end of the tax year is fast approaching. The passing of 5 April can have implications for separated married couples or civil partners, which they often do not consider in advance.

The decision to separate in the lead up to the end of the tax year can have significant consequences on the resolution of financial matters on divorce. As part of a financial division, there may need to be a transfer of a property or shares between divorcing spouses.

The property or shares may be held:-

– jointly by the parties, and need to be transferred into the sole name of one person;

– in the wife’s sole name and need to be transferred into the husband’s name; or

– in the husband’s sole name and need to be transferred into the wife’s sole name.

For capital gains tax purposes, transfers between separated spouses will be treated as ‘no gain-no loss’ in the tax year of separation. This means, for example, if a couple have separated since 6 April 2014, they would only be able to receive this benefit if the transfer of the property or shares takes place before 5 April 2015. If the transfer takes place after 5 April 2015, this could trigger a CGT charge.

If there are assets which could have an inherit CGT liability, it is important to take early legal advice and if possible, before separation occurs. Generally speaking, if there is to be a separation, it is often sensible for the separation to take place as early as possible in the tax year to enable transfers to take place within the tax year of separation.

Sarah Walls is an associate in the family team in Exeter, which was named Private Client and Family Law Team of the year at the British Legal Awards 2013. Sarah can be contacted on 01392 210700, by email