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Sam
Sam, Accountant
Category: Tax
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Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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Is someone able to help me with advice regarding capital

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Hello is someone able to help me with advice regarding capital gains tax during a divorce? My estranged husband and I owned two properties jointly, I kept the family home which he later transferred into my sole name, and he moved into the other jointly owned property which had previously been rented out He then asked to sell the house that he had been living in earlier this year so he could buy a new property with his new partner. Although it was still in joint names, he took all of the profit from the sale, and I have a letter from his conveyancing solicitor to verify this. I sold the house that had previously been the marital home late last year and have bought a property jointly with my new partner. I have my Decree Nisi and am just about to apply for my Decree Absolute. But my solicitor has asked me to get expert CGT advice before he draws up a court order to try to ensure I don't have to pay CGT on the house that had previously been jointly owned that my husband took all profit from.

Hi, Sam here , one of the UK tax Experts here on Just Answer, thank you for your question and I shall reply shortly

Customer: replied 14 days ago.
Thank you. Wondering if a court order provided by solicitor would help. We sorted out the financial division between ourselves and just using solicitor for divorce.

Hi

Thanks for your patience

I am afraid that you will have a capital gain on the sale on that second property as it remained in your name as well, even if you did not (which you indicate) receive anything from its sale.

Unless the transfers had taken place within the actual tax year in which you seperated - this would always have been the case.

Your ex husband will also have a consideration for capital gains on the sale of the marital home - if it remained in joint names and was sold more than 18 months after he moved out.

But it up to him to establish his side of matters - lets deal with your position with this second rental property

Can you advise

1) how much as it purchased for

2) the month and year of purchase

3) What the legal etc costs to buy were

4) the costs of any capital improvements such as new kitchen etc

5) the date of sale

6) how much sold for

7) The costs to sell (legal and estate agents)

8) The dates it was rented from and to

9) confirm that you declared your share of the rental income to HMRC for the dates relevant at question 8

10) What your annual income is so I can advsie the correct capital gain rate

I can then advise your capital gain position, which ideally would have been dealt with as part of the divorce settlement -

Thanks

Sam

Customer: replied 12 days ago.
Hello Sam, I would need to go through the files in order to get some of this info, I can confirm that the rental income has been declared to HMRC as the property was rented through an agency. When I spoke to HMRC about this situation last year when my husband first raised the question of him wanting to sell the house, they told me that by raising a court order splitting the properties between us as part of the divorce financial settlement would exempt me from capital gains. Can you confirm this? Thanks Keri

HI Keri

That's not quite correct - unless dealt with in the same tax year of separation would there be a consideration for exemption - I am ex HMRC worked there for 26 years and here is the link from the capital gain manual that clarifies my answer

https://www.gov.uk/money-property-when-relationship-ends/tax

And read specifically this section

If you transfer an asset when you’re separated

If you lived together at any point in the tax year that you transferred the asset, the normal rules for spouses and civil partners apply.

Otherwise you may have to pay Capital Gains Tax. You’ll need to get a valuation of the asset on the date of transfer, and use it to work out the gain or loss.

The tax year is from 6 April to 5 April the following year.

Then it goes on to look at divorce but it a;ll hinges on the tax year of separation for capital gains, so unless you had a transfer of assets position drawn up in the same tax year of separation then any following court finalising that position does not count for exemption I am afraid

Thanks

Sam

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