| As a general principle transfers of assets between | | | | or civil partners, and living together at sometime during |
| spouses living together, including Civil Partners, are | | | | the tax year. The principles will therefore apply to |
| deemed to take place on a 'no gain, no loss' basis and | | | | transfers which take place in the year a couple |
| no charge to tax will arise. The acquiring individual is | | | | permanently separate. |
| treated as if the asset was acquired for a | | | | Thereafter however, such transfers, even if part of a |
| consideration of such an amount as would ensure that | | | | financial settlement arising on divorce or dissolution, |
| on the disposal neither a gain nor a loss would accrue | | | | may give rise to a charge to CGT. |
| to the individual making the disposal (section 58 TCGA | | | | The reason is that, assuming the transfer of assets |
| 1992). | | | | takes place in the year following separation, but when |
| This can produce significant opportunities for mitigating | | | | the parties are still married, or civil partners, then the |
| Capital Gains Tax (CGT) liabilities otherwise arising by | | | | disposal will be to a "connected person" as defined in |
| arranging assets so as to:- | | | | the Taxation of Chargeable Gains Act 1992. Such |
| - Make use of individual CGT exemptions available | | | | disposals are deemed to take place at market value, |
| (currently £9,200); | | | | irrespective of the consideration changing hands, if any. |
| - Utilise lower and basic rate tax bands. | | | | So, take for example a husband transferring an |
| This can often involve the transfer of ownership of | | | | investment property to his wife as part of an agreed |
| assets prior to disposal, often at the "last minute". As | | | | financial settlement. The market value of the property |
| the liability for CGT follows 'beneficial ownership' | | | | at the time of transfer is £200,000 and had an |
| principles, rather than legal ownership, this can often be | | | | original acquisition cost of £100,000. The gain |
| achieved by way of 'declaration' rather than the | | | | arising after taper relief and annual exemption is |
| physical transfer and vesting of assets in the name of | | | | £50,800 giving rise to a potential liability to CGT |
| the recipient. A useful tool when timescales are tight! | | | | of £20,320. |
| The general principles outlined above only apply to | | | | In such cases it is imperative that the question of CGT |
| transfers in a tax year when the couple are married, | | | | is considered at an early stage in the divorce process. |