I have been asked by my Family colleagues to advise on the CGT position in respect of a proposed transfer of rental property between divorcing spouses. The couple have agreed to separate and a Decree Nisi was issued last year but due to health reasons they are still living in the same property.
TCGA 1992 s58 refers to “a married woman living with her husband” and says that any transfer between them in a tax year when this is the case is made on a nil gain/nil loss basis.
HMRCs help sheet 281 defines living together as being the default position unless they are separated by a court order, a deed of separation or “in such circumstances that the separation is likely to be permanent”. It does not cite any justification for this It then refers to a marriage “breaking down” and says that they could still be “living together” if they do not live in the same house. There is no mention of the case where they are living in the same house but are separated.
As any proposed transfer will be in the current tax year, is the fact that they are still living together in the same house even though their separation is likely to be permanent following the Decree Nisi sufficient to avoid CGT?