15:45 PM, 23rd May 2012, About 10 years ago 3
Breaking up is hard to do – and that applies to a property portfolio as much as a marriage.
Luckily, if buy to let landlords divorce, some special tax rules can help minimise the taxes involved in any exchange of assets.
Generally, disposals between a husband and wife or couples in a civil partnership are exempt from capital gains tax (CGT), so property transfers within the marriage do not trigger any liability.
The rules change on separation and divorce.
Other CGT reliefs like private residence relief (PRR) and lettings relief apply at all stages of the break-up.
The 12-month exemption is designed to give a couple time to make financial plans without an unfair tax charge.
Even in the most contested of divorces, couples should put their differences aside and protect their finances.
However tough the negotiations, decide who gets what from the property portfolio before the end of the 12-month period of grace before CGT is charged.
Don’t worry about the cash, but agree how to divvy the portfolio in principle – the date of this agreement is the trigger date for CGT, not the date when any cash changes hands.
Leaving agreements to chance is not a good idea – gather evidence along the way to prove the relationship has ended, like a copy of the deed of separation and a property transfer agreement witnessed by a solicitor.
This way, the tax man cannot undermine any negotiations by demanding more tax.
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