Draft legislation has been published providing some good news for divorcing couples who transfer assets between themselves after separation.
Married couples who are living together can transfer assets from one to the other on a nil-gain nil-loss basis which means that no capital gains tax arises on the transfer.
This special rule for married couples does not apply to couples who have separated. The nil-gain nil-loss transfers can only be made until the end of the tax year that separation takes place. After that, transfers take place at market value regardless of whether there is any actual payment. This can mean that capital gains tax becomes payable even though no proceeds have been received.
Clearly this can lead to unexpected and unwelcome charges, especially for those couples who separate late in the tax year.
The draft legislation extends the nil-gain nil-loss transfer period for an additional three years after the end of the tax year of separation, giving couples much more time to deal with marital assets. If the legislation passes as expected it will apply to disposals on or after 6 April 2023.
