Tax may not be at the top of the list of priorities for couples going through separation and divorce but it is extremely important to consider the tax implications as early as possible to avoid the taxman taking too large a share of your financial settlement.
1. The family home
In many cases the value of the matrimonial property will have risen significantly since the couple bought it. Tax exemptions are available but there are time limits involved. We will advise you of the reliefs available and the time periods involved to ensure you are fully aware of the tax implications that might arise, particularly as a result of prolonged disputes over property division.
2. The date of separation
For income tax and capital gains tax purposes, it is the date of separation rather than the date of divorce that matters. If you are considering a Deed of Separation or a court order we will let you know if this is likely to give rise to a tax liability.
3. The tax year
Each party benefits from an annual Capital Gains Tax (CGT) exemption. Careful planning means assets can be transferred in different tax years to take advantage of two consecutive annual allowances. However, certain rules apply and we will advise you on the best way to approach the transfer of assets.
4. Treasured possessions
Care must be taken when valuing jewellery, antiques, art and other valuables such as classic cars and family heirlooms. Assets that are transferred at open market value may be liable for CGT
5. Business assets
The tax implications of business asset transfer will be dependent on how the transfer is handled and what exemptions are available.
Taxation will affect divorcing couples differently depending on their individual circumstances and, in addition to the areas mentioned, there may be other issues to consider such as income tax, inheritance tax and pension sharing. By gathering relevant information at the outset, we can avoid delays and complications further down the line when it might be too late to do anything to mitigate the tax burden.
We are not tax advisers but we can identify when a tax liability may arise and make sure you are able to get the relevant tax advice to address this as part of the settlement terms and are not left with any unexpected tax bill in the future.
Andrew Meehan is individually recommended for family law by both Chambers 2017 and the Legal 500 2016. He is also a Resolution accredited specialist solicitor for divorce cases involving complex financial and property matters.
This article has been prepared with the aim of providing general information only and does not constitute legal advice in relation to any particular situation. While we aim to ensure that the information is correct at the date on which it is added to the website, the legal position can change frequently, and content will not always be updated following any relevant changes. In addition, everyone’s circumstances are different and this article is provided by way of general information only and must not be relied upon. If you require legal advice on a family law issue, please feel free to contact us by emailing enquiries@harrogatefamilylaw.co.uk. Harrogate Family Law accepts no liability whatsoever in contract, tort or otherwise for any loss or damage caused by or arising directly or indirectly in connection with any use or reliance on the contents of any part of our website, except to the extent that such liability cannot be excluded by law.
