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Sam, Accountant
Category: Tax
Satisfied Customers: 14192
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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My husband and I are going through divorce after 37 years and

there are no children. ... Show More
there are no children. We had the decree nisi in Feb 2012, but there have been several trial reconciliations since then, the last one in June-Sept 2013. We will now be going through with the Absolute and there is no dispute between us regarding the financials which we are agreeing ourselves and asking to be put forward in a Consent Order. In addition to our main home in the UK, which I am occupying on my own, whilst he has expat status for tax purposes living in Hong Kong, we jointly own an investment property in the UK which we will either sell pre or post the Consent Order and split the proceeds 50:50 (there is no mortgage on the property). Alternatively, my husband may want to buy me out pre divorce or as part of the Consent Order. If he does want to buy me out or even if we want to sell, is there any advantage or disadvantage regarding capital gains tax if we do it one way or the other? I have read all the Tax Office advice and it isn't clear in our circumstances. It looks like there might be an advantage to leaving it as part of the Consent Order, but it is unclear.
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Thanks for your question - I am Sam and I am one of the UK tax experts here on Just Answer.

I am afraid whether this is done pre or post the consent order, as this has not been drawn up as part of the separation agreement (using Sept 2013) and sits in the same tax year, then any assets that would have been considered exempt for capital gain purpose (such as the matrimonial home) will give rise to a capital gain charge, under the normal capital gain rules.

So if you take on the full share of the matrimonial home, then if more than 18 months lapse from the date it was deemed to be no longer your husband main residence and the transfer. he will need to consider capital gains.

For the investment property, this will give rise to capital gains, as it would have done, had you remained married.
So whenever the sale takes place (pre or post any consent order) a capital gain position will arise.
And as far as the consideration of you being bought out, you will then have a capital gain at the time this transaction arises.
And he, in due course if, and when he sells the property as a sole owner. (although some consideration for non residency may better his position)



Customer reply replied 4 years ago.

Hi Sam


I should have made clear, we have no formal separation agreement, we have just informally agreed terms and they will form part of the Consent Order when I apply for the Absolute. The matrimonial home will form part of the Consent Order to be sold and split 50:50 and I assume will not attract any CGT.


I read somewhere that if an asset was transferred as part of the Consent Order in a divorce it might not attract CGT even if there was consideration. From what you say, that appears not to be the case.



Hi Gerrie



Thanks for your response



You are in part correct with what you have read, however both the separation and the financial agreement element all have to take place in the year of separation - which you advise was Sept 2013 - which was last tax year 2013/2014 - so any element of the financial position that arises now (in the tax year 2014/2015) will not fall into this exempt consideration.




It matters not that you do not have a formal separation legally documented drawn up - its what took place as fact -



And I would add, aside from that the sale of the investment property was always going to give rise to capital gain, So its really just the position of the decision to transfer (sell) your share to your husband.



And its crucial that the agreement documenting the share of financial assets took place in the year of separation for HMRC to ever consider it falling within the normal spousal exemption.



See the link here from the HMRC website and go to the heading Separation, Divorce and Capital gains tax.



I am sorry the position is not more favourable





Customer reply replied 4 years ago.

Thank you.

You are very welcome