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When to pop the alternative question? When to pop the alternative question?

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May 15

When to pop the alternative question?

Written by When to pop the alternative question?

When to pop the question “Will you marry me?” weighs heavily on the minds of many fiancés-to-be but the timing of the request to dissolve any marriage or civil partnership should be considered with as much care, as there are some serious tax consequences that might not seem obvious.

When married couples or civil partners separate and there are assets that need to be transferred between them then so long as the spouses or civil partners lived together during the tax year of separation they can transfer assets between one another at any time in that tax year at ‘no gain or loss’.

For Capital Gains Tax purposes, the date of separation is more important than the date of the divorce and therefore careful planning needs to take place about when a ‘permanent’ separation should take place.

How to divide the assets on the breakdown of a marriage or civil partnership need not be drawn out. As well as the traditional method of solicitors dealing with matters in correspondence there is a growing trend for alternatives such as round table meetings, the use of the Collaborative Law process and mediation. These methods of dispute resolution can expedite a financial settlement and help to ensure the separation is as amicable as possible. This is particularly important if a transfer needs to be within the tax year.

Therefore, if you are considering bringing a marriage to an end and there are assets that may need to be transferred as part of a financial settlement, then before you ask for a separation, take specialist matrimonial and tax advice, particularly if the end of the tax year is approaching.  Do not ask your spouse/civil partner for a separation on 3 April! As quick as lawyers try to be it is unlikely that any transfer could be completed by the end of that tax year and this could lead to a large capital gains tax liability.

Sarah Minors is a Senior Associate in the Family Unit at Raworths LLP and is an accredited member of the Law Society Family Law Panel. To contact Sarah you can contact her at sarah.minors@raworths.co.uk

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