Whilst tax might be the furthest thing from your mind when going through a difficult split, there can be significant tax implications that come with separating from your partner that it’s important to be aware of.
A recent case (Wilmore v The Commissioners for His Majesty’s Revenue and Customs) saw a woman faced with a hefty Capital Gains Tax bill of over £14,000 following the separation from her husband, after he renovated and sold a property they jointly owned for a substantial profit.
At the time of the separation, the couple agreed on the wife to stay in the matrimonial home, while the husband would move to their other property. As this property wasn’t the wife’s principal residence, when her husband sold it for a profit HMRC assessed the wife as being liable for a £14,376 Capital Gains Tax charge following the transaction.
It was found that the couple had informally agreed on them each taking one property, and this was also later reflected in their divorce settlement. Whilst the wife had made a £100,000 contribution to the purchase of the property, she was no longer contributing to the mortgage after the split and had no part in the renovation or sale of the house. She was not living there or benefited from any proceeds from the sale, but was listed as a joint owner when the sale went through.
The First-tier Tribunal (FTT) found that the informal agreement between the couple had the effect of transferring all the wife’s beneficial interest in the property to her husband, so she was not to be liable for the Capital Gains Tax bill, and the husband became the sole beneficial owner of the property.
Separating from a partner is an incredibly stressful and emotional time, which is only elevated when assets like shared properties are involved. It’s important that if you find yourself in this situation, that you know where you stand.
Our dedicated Family team at Bromleys are here to advise you on all areas of your separation, ensuring the best results possible for you and your loved ones. Call us today on 0161 330 6821 or email bromleys@bromleys.co.uk to speak to one of our experts.