Divorce is rarely something to celebrate, but recent changes to the law will go some way to making separating easier and more tax efficient, especially for farming couples.
From April 6, 2023, a major change in the way Capital Gains Tax is levied on couples going through a break up was introduced, which will help to give both parties some peace of mind in an otherwise miserable situation.
Previously, separating couples wanting to exchange assets such as investments, personal possessions, or property other than the main residence, needed to have done so before the divorce was completed and in the same tax year as when they decided to separate, to avoid paying Capital Gains Tax. This meant that if they decided to separate in January, they could have had only until April 6 of the same year to transfer any assets between each other.
The new law, however, does away with these conditions and enables divorcing couples to exchange assets on a no gain/no cost basis for up to three years after ceasing to live together or for an unlimited period if the transfer occurs as part of formal divorce proceedings.
This change has been introduced to provide couples with more time to reach a formal settlement without incurring Capital Gains Tax liabilities for the transferring spouse, and to create a fairer and more manageable process, particularly for those involved in complex asset division during divorce proceedings.
Welcome Relief For Farming Families
Ian Parker, partner and agricultural tax expert at Whitely Stimpson, said the change would be particularly welcomed by farming families.
“Dividing the assets of a farming business, particularly if both parties are directors, can be a difficult and long-winded undertaking that couples might not want to do when emotions are high, and feelings of loss are raw. Having an extended time to do this, as this change of law allows, will enable couples to come to terms with what has happened before addressing the issue of the farm business assets and deciding on the best outcome for all parties, without the extra worry of being hit with a large Capital Gains Tax bill.”
If you are going through a difficult situation and need to discuss the best way forward for your farming business, get in touch on (01295) 270200 or email firstname.lastname@example.org.