Divorce and GGT outside of the 12 month exemption

by Readers Question

10:42 AM, 8th December 2017
About A year ago

Divorce and GGT outside of the 12 month exemption

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Divorce and GGT outside of the 12 month exemption

My ex-wife and I are in the final stages of an amicable divorce. I am keeping the main residence, which we jointly owned together, and I am in the process of buying her out. I have already given her half of the money which she is due.

In order to complete the buyout and financial settlement, and for her to receive the second payment, I am giving her a flat I own solely in my name. The original plan was to sell this flat and then give her the money. The proposed sale arrangement, and cash transfer to her, is recorded in our financial court order which has been approved and stamped by a divorce judge.

For various reasons, mainly market conditions, I am no longer selling the property and giving her the money, instead I am transferring it to her. I have discovered that there is 12 month window for CGT exemption and I have two questions:

1) Is there anything that can be done to reduce or negate the CGT bill outside of this 12 month window? An accountant has prepared a CGT estimate, taking into full consideration rental periods and PPR etc, and I am currently looking at a CGT bill of £70,000.

2) What, exactly, determines the 12month period for exemption? Is it A) the date of the financial court order? B) The date of which we split up? C) The date at which we were finally divorced, Decree Absolut? D) none of these and something else entirely?
There is a comment on a previous 118 article below, which gives me some hope I may still qualify to make the transfer to my ex within a 12 month window and thus avoid the CGT penalty…. Any thoughts very welcome

CGT and divorce for buy to let landlords


“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.”

Many thanks

JF



Comments

Neil Patterson

10:55 AM, 8th December 2017
About A year ago

"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.

If the couple are still living together, the CGT exemption still applies regardless of the state of their relationship
The CGT exemption continues for the first 12 months after the couple starts living apart.Couples living together or unmarried couples or relatives jointly owning property cannot take advantage of this CGT exemption if their relationship breaks down.
The couple stay ‘connected’ for CGT until the date of the decree absolute, so any transfers after the first 12 months of separation are tax treated as sales at market value"

Rob King

17:44 PM, 8th December 2017
About A year ago

Reply to the comment left by Neil Patterson at 08/12/2017 - 10:55Hi Neil,
Thanks for your feedback on this issue, much appreciated.
Please could you clarify what you mean by this:
The couple stay ‘connected’ for CGT until the date of the decree absolute, so any transfers after the first 12 months of separation are tax treated as sales at market value"
What do you mean by 'the couple stay connected'? Are you saying transfers after the decree absolute are liable are treated as a sale and therefore full CGT applies?
Many thanks, Rob

Rob King

17:47 PM, 8th December 2017
About A year ago

Reply to the comment left by Neil Patterson at 08/12/2017 - 10:55
One further question....

Our decree Absolute was in April 2017. Therefore if we make the transfer before April 2018 does the exception still apply?

Thank you.


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