With the financial year end looming, finances and tax are hot topics on everyone’s mind at the moment. If you are separating, your divorce may be the last thing you think has year-end consequences, but if you are considering transferring assets between you then it is important that you seek professional advice before the year end on 5 April 2019.
This is because tax may be able to be minimised when transferring assets if you act before the year end, leaving more in the pot to be distributed between you.
The implication of the year end mostly impacts on Capital Gains Tax (‘CGT’). This is because spouses are treated as ‘connected parties’ for CGT purposes. Connected parties are able to transfer assets between them (for example, property, shares or investments) on a ‘no gain, no loss’ basis.
Crucially, you will continue to be classed as ‘connected persons’ up until the last day of the financial year in which you separated. This means that if you transfer these assets during the tax year in which you separate then you can continue to rely on your connected person status when making the transfer, meaning there is no immediate CGT liability for either the transferee or transferor. By contrast, if you made the same transfer in the tax year following separation, there may be an immediate CGT liability assessed against the transferor, but at market value. Any transfers made post-divorce would be assessed on the actual consideration received.
So what does all of this mean for you?
If you are thinking of transferring assets between you and your spouse on divorce, it is important that you act fast and obtain specialist advice before the year end.
It is especially important to take specialist advice prior to coming to any agreement with your spouse for financial provision, to ensure that you are leaving as much as possible in the matrimonial pot for division at the end of the day.
At BTO we have both specialist family law and wealth planning teams who can assist if you think this will impact you. Click here to get in touch.