When spouses or civil partners separate, for capital gains tax purposes, the no gain/no loss treatment is only available in relation to any disposals up to the following 5 April. After that, transfers are treated as normal disposals for capital gains tax purposes, which means that CGT may arise on any gains on transfers between them that are treated as made at market value.
As previously announced, the Spring Finance Bill 2023 will provide that:
- Separating spouses or civil partners now have up to three years after the year in which they cease to live together to make no gain/no loss transfers.
- The no gain/no loss treatment will also apply to assets that separating spouses or civil partners transfer between themselves as part of a formal divorce agreement.
- A spouse or civil partner who retains an interest in the former matrimonial home can claim private residence relief (PRR) when it is sold.
- Individuals who have transferred their interest in the former matrimonial home to their ex-spouse or civil partner and are entitled to receive a percentage of the proceeds when that home is eventually sold, be able to apply the same tax treatment to those proceeds when received that applied when they transferred their original interest in the home to their ex-spouse or civil partner.
These changes represent a welcome relaxation of the CGT rules for separating couples. As the Government has said in their announcement about this measure: “…more time can be spent on the divorce considerations, rather than Capital Gains Tax considerations. The extension will also help avoid further depletion of household income or accumulated wealth through dry tax charges for those who meet the new time period.”