Anyone thinking of separation and divorce might be better off waiting until the new tax year starts on or after 6 April 2019, according to Thursfields Solicitors.
The warning from the Midlands leading law firm is focused on the potential impact of Capital Gains Tax (CGT), the tax on the profit when you sell or dispose of assets that have increased in value, costing up to 28% of gains from property sales, or up to 20% of gains from other assets.
Susanne Leach, associate solicitor in the Family department in Thursfields’ Kidderminster office, explained: “Up to and including the tax year of separation only, the transfer of assets between spouses is exempt from CGT as ‘connected parties’ with no gain and no loss.
“That’s the position until Decree Absolute, even though you may no longer be living together at the time of the transfer, and applies to assets such as an interest in a rental property or holiday home, investments or shares in a family business between husband and wife.
“After the tax year of separation, the transfer of assets between spouses will usually be treated as a ‘transfer at market value’, which means any gain in value since the asset was acquired may be liable for CGT.”
Ms Leach pointed out that potential CGT is not only significant to the overall assets but will also raise the question of who’s responsible for any liability, making the timing of divorce petitions a potentially crucial matter.
She said: “It may be disadvantageous to separate in March if the transfer of assets between you may give rise to CGT, given only a few weeks of the current tax year are left.
“The date of separation is a factual issue, and there may be an advantage to separating and issuing divorce proceedings early in the tax year to give time to reach a financial settlement, including a transfer of any assets which may attract CGT.”
Ms Leach underlined the importance of discussing such issues with an experienced matrimonial lawyer. She can be called on 01562 512428 or emailed at email@example.com.
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For further information, please contact:
Dani James, Business Development Manager, Thursfields Solicitors
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Notes to Editors
Thursfields Solicitors is one of the region’s longest established and reputable law firms, with more than 150 staff in eight offices across Worcestershire and the West Midlands. Thursfields Solicitors provides a full range of legal services to business and the private individual, including property, family, employment and commercial law as well as probate and litigation. The firm has offices in Worcester, Kidderminster, Halesowen, Sedgley, Stourport-on-Severn, Solihull and Birmingham.