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Harris, Family Law Expert
Category: Family Law
Satisfied Customers: 2851
Experience:  Family Law - Specialist in Divorce, Financial Relief and Children Matters
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I wonder if you can help. I am divorced (decree absolute)

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Hi, I wonder if you can help. I am divorced (decree absolute) and in process of clean break settlement with my ex wife. I have retained custody of the three children and the marital home as she has left to be with a new partner. We have agreed a settlement (plus a 50/50 share of my pension), with a lump sum now and a final lump sum of £100k in two years time, which allows me to retain home for the children without having to sell. Everything is ready to send to the court to ratify however her lawyer has now reverted at the eleventh hour requesting that I indemnify her against CGT on the balancing lump sum. I genuinely didn't think there would be any payable. Is this the case? Thank you.

Hi, thank you for your question. In relation to the home, is it currently in joint names with your ex-wife?

Customer: replied 1 year ago.
Hi Harris, yes it is currently in joint names and will remain so until I make the final lump sum payment. It also has a mortgage which is also in joint names, albeit I make all the mortgage payments.

Thanks for confirming. Depending on how long she has been vacant from the property, there could potentially be a CGT liability in relation to her share when you come to sell the property or have it transferred. This will require formal calculation depending on the value of the property and increase in value.

I appreciate that this may not be the answer you would have hoped for, but if you found this information helpful please provide a positive rating using the stars at the top of this page. I will not be credited for answering your question without a positive rating. Thank you,

Customer: replied 1 year ago.
Thank you. She will have been vacant for two years when the final lump sum is made. Current value is £700k.
What is the formula that is used for any CGT liability she may potentially be liable for. She does not work and has no other income.

Are you planning to transfer the home into your sole name and is she planning on purchasing a new property (if so when?)

Customer: replied 1 year ago.
she will remove her name from the property and the mortgage as part of the court order upon payment of the final sum in two years. No, she is unlikely to purchase, she will rent a property instead. She doesn't work.

Thanks for confirming. When exactly did you formally separate and when did she move out of the home?

Customer: replied 1 year ago.
Decree absolute was Oct 2015. We separated in Jan 2015, although she still comes back one/sometimes two nights a week at the moment (usually a Sunday) to do her washing, see the children but just stays in one room out of the way. We don't speak but I think she spends rest of the time between her new partner, her sister and her friends house. Sadly, she has a bit of a drink and mental health problem - hence moving between lots of houses and not really being interested in the children, other than the odd event. I do all the cooking, cleaning, washing, ironing, lunches, homework, days out, etc.

Thanks for confirming. Under the CGT rules, where, as part of a financial settlement on separation, divorce or dissolution, the spouse who has ceased to occupy the matrimonial or civil partnership home:

1.Transfers an interest in that home to the other spouse; and 2. the date of transfer takes place more than three years after the time when the spouse or civil partner last occupied the matrimonial or civil partnership home full Private Residence Relief will not be due.

However, the former matrimonial home can be treated as the only or main residence of the transferring spouse from the date her occupation ceased until the earlier of:

1. the date of transfer; or

2. the date on which the spouse whom the property is transferred ceases to use it as his or her only or main residence.

As she is not in a position to purchase another property she will not have a further main residence for CGT purposes and therefore her relief.

In the circumstances your worst case scenario is that you would be liable for CGT starting from 3 years after October 2015 (therefore October 2018) and you should hope to have the property transferred to you by this time to avoid any liability.

I hope this assists you. If you found this information helpful please provide a positive rating using the stars at the top of this page. I will not be credited for your question without a positive rating. Thank you.

Customer: replied 1 year ago.
Thank you for your response. One last point, just to clarify is the CGT based on the £100k lump sum? And is it her that is just liable (the leaving party - obviously me as providing the indemnity), I'm assuming that I also am not liable for CGT for staying in the house and having no cash benefit.

CGT will be based on the value of her share of the property/transfer depending on when it is transferred to you. She would be liable only in relation to her share of the property and any capital gain that is made on the property.

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