Less haste – more tax

You could be forgiven for thinking the current tax rules encourage hasty divorces. To combat this, The Law Society is recommending that the capital gains tax exemption on transfers of assets following separation or divorce be extended beyond the tax year of separation.

They feel this may:

• Prevent spouses or civil partners unwittingly incurring a capital gains tax charge following separation or divorce if they transfer property after the year of separation
• Avoid divorces by removing the existing incentive to share out the matrimonial assets very soon after separation, thereby allowing more time for mediation

The Law Society believes its recommendations are timely. First, the popularity of ‘buy to let’ investments makes it more likely the Courts will have to resolve ownership issues and order transfers of property on separation or divorce. Secondly, the House of Lords decision in White v White makes it clear the Courts will be prepared to order more substantial transfers of property between former spouses to ensure greater financial equality.

If you would like further information on the tax aspects of separation, please contact:
Andrew Goldstone
Tel +44 (0)20 7440 7205
andrew.goldstone@mishcon.com