Will a husband and wife after nisi but prior to decree absolute be treated as “separated” for cgt purposes if they live in the same house, but “live separate lives”?
Simon Northcott
For CGT purposes, couples remain connected once separated and until decree absolute and so assets pass at market value. In the tax year of separation, the no gain/no loss rules apply.
I assume therefore that you are outside the tax year of separation and so prior to ‘absolute’ the CGT position would be as for connected persons, with assets passing at market value. It’s irrelevant how or where they are living.
Lucy Orrow
Lambert Chapman LLP
I have a very similar scenario, where the nisi was obtained two tax years ago on the grounds of separation, but the absolute was not applied for, apparently pending attempts at reconciliation!? My reading of the legislation is that the couple must in fact be be separated in circumstances in which the separation is likely to be permanent. With hindsight, it will be clear whether the separation is to be be permanent, but right now, I don’t think that applies. Bearing in mind the couple have actually lived in the same house since the nisi, I am taking the view that the CGT relief between spouses applies.
Haroon Rashid
I Will Solicitors Ltd
The question is whether “separation” has actually taken place for these purposes, in a situation where there is a decree nisi based on “living apart”, but the couple still live in the same household with their
children, but otherwise live separate lives?
Simon Northcott
For CGT purpose, my recollection is that they get spousal exemption for transfer of assets between them during the tax year of separation. Thereafter, only if the transfer occurs pursuant to a court order as part of ancillary relief settlement which is (assuming still applies) subject to HMRC concession regardless of timeframe.
Viju Chhagan
Palmers
I would suggest , Yes.
They are not living together as they are in fact separated in circumstances which are likely to become permanent [ITA 2007 s1011; TCGA 1992 s288(3)] even though they may currently physically live in the same house. They are living separate lives.
The marriage has broken down [HMRC MANUAL CG22070].
Malcolm Finney