“The best things in life are free, but sooner or later the government will find a way to tax them.”
Ah, tax and the Inland Revenue. Complicated regulations that catch you when you are alive, dead and divorcing. There is some good news on the horizon as from next year, however. Next year? Listen, when it comes to tax, take the rainbow whenever it is going to shine.
Up until now, when assets are transferred between spouses or civil partners who separate, no gain or no loss treatment (i.e. not tax payable) is only available in relation to any disposals (e.g. sale or transfer) in the remainder of the tax year in which the separation happens. After that, transfers are treated as normal disposals for capital gains tax purposes – and you have to pay tax in the normal way; no exemptions. So, if you decided to separate on 7 April, you have a whole year to sort things out. Worst date to separate? 5 April, surely.
So what is changing?
Proposed revisions as from 6 April 2023
Legislation will be introduced in Finance Bill 2022-23 that will provide that:
- 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
- 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 – so without the time restriction – hurrah!
- a spouse or civil partner who retains an interest in the former matrimonial home be given an option to claim Private Residence Relief (PRR) when it is sold – good new for those spouses/civil partners who have to wait for their share in the house whilst the children are young and living in it
- 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, be able to apply the same tax treatment to those proceeds when received that applied when they transferred their original interest in the home to their ex-spouse or civil partner – even better than above because that has to raise the possibility of two lots of PRR – one for the old house and one if they decided to sell their new property within the 12 months of getting the money from the first one.
These new provisions will apply from 6 April 2023 and I think are very welcome.
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