Transfer of Assets – CGT Rules due to change for divorcing spouses

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Under the current tax rules, the transfer of assets between former spouses or civil partners is made on a ‘no gain or no loss’ basis but only if transfers of assets take place in the tax year in which the couple have separated. This means any gains or losses from the transfer are deferred until the asset is disposed of by the receiving spouse.

The receiving spouse will be treated as having acquired the asset at the original cost paid when the transferring spouse purchased the asset.

If the transfer occurs after the tax year in which the spouses separated then it is treated as a normal disposal and will be subject to Capital Gains Tax in the normal way.

Subject to confirmation, the new rules which relate to transfers occurring after 6 April 2023 will allow for a longer period of the ‘no gain, no loss’ rule for up to three years after the year spouses have stopped living together.

The ‘no gain, no loss’ rule will also now apply to assets that are transferred between spouses as part of a formal financial remedy agreement pursuant to divorce proceedings.

Brighton & Hove Law are not tax advisors and suggest formal tax advice is obtained from qualified accountants.

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