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What tax year so we have to use for Capital Gains Tax on other properties after second separation leading to divorce?.

by stargirl 18 September 2012 | Comments

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I moved out Sept 2011 and rented elsewhere. July/ Aug 2012 we lived together again and tried a reconciliation. (i still had a separate rented property - due to lease not ended) After a holiday away together I dont think it is working and I believe we will officially separate within the next couple of months and i will return to the rented property. I am not concerned about our residential property but we have 4 other properties we rent out as a business - not a limited company. (mortgages on 2 only) We will transfer these to each other to share out as such. Will we have to pay CGT? or will our short period together again mean we can use this tax year 2012/2013 as our seperation date. As we at least get on well now, we plan to arrange the finances before we divorce officially.

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MikeGG1 posted
You have said you will divorce, so I assume that you are married. If that is the case then whilst you are still married, you can transfer any number of assets of any sort between yourselves PRIOR TO DIVORCE. There will be no CGT liability involved.

However, the transfers will be deemed to have been made at the original date of purchase and at the then cost, so any future sale would backdate everything to then.

Depending on how much the individual gains are, it might be better to crystalise the gains after divorce, or later.

Were they bought as Joint Tenants or as Tenants in Common? If they were bought as Joint Tenants, they could be transferred before divorce to Tenants in Common. You would then each own half of each property. After the divorce, you could transfer your half of property 1 to your then ex who would then own both halves of property 1. You would be liable for CGT but only on the half that you transferred, and the first £10,600 is tax-free.

Your then ex. could at the same time transfer half of property 2 to you so that you would then own all of property 2. She would be liable for CGT as above.

The following year you could repeat the process for properties 3 & 4.

That would minimise the tax payable and mean that the base for subsequent sales of each property would be half on the original date of purchase and half at the date of subsequent transfer, which would reduce the gain assessible for CGT.

Again there would be the £10,600 allowance and that could used twice if the sales were in different years and subsequent to year 2.

Alternatively, if one of you wanted to sell, the year one transfers could be done, then one, or both, of those properties could be sold in year 2. The year 2 transfers could then be done in year 3 and any sale in year 4.

By year, I mean tax year, so divorce now anjd year one would be by 5 April and year 2 could be as early as 6 April.

I hope that helps. It is so much better to sort these matters out at the earliest possible moment.

Mike
Posted on 18 September 2012 | Love 0 loves Report

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