Divorce/Business/Houses - Tax

Sugarloaf

There must be lots of people going through the divorce process and I can't seem to find a consolidated thread on divorce with regards to finance planning, tax implications, capital gains tax and other finance complexities when you are in business together.

We have been married 24yrs and have built a property business together, but how do you divide it at the least cost?

Is there anyone who could help i.e financial guys who can advise about selling property, transfer of title or could think of the best way to divide assets without incurring every tax going? Could the whole process instigate a tax investigation.

Together with the stress of getting divorced, it seems an overwhelming task to sort out everything.

Would this be the right thread for the kind of advice I need?

Thank you.

WHA

Transfers of property between husband and wife are exempt from capital gains tax (and I understand exempt for stamp duty). As long as you transfer properties out of joint ownership and into either your own or your wifes name within the time limits, (I think within the tax year of permanent separation) then you have no CGT to pay.

Obviously selling any property or asset to a third party would create a potential CGT liability, subject to all the usual reliefs and exemptions.

Surely your own accountant and solicitor are the best people to discuss and plan the finances - what are they suggesting you do?

Sugarloaf

Thank you for your replies.

We are at the initial stages of the divorce and I have had only one appointment with a solicitor. I was advised that transfer of property could take place between husband and wife without incurring CGT. As we have only just decided to get divorced, would it then be advisable for all of this to take place after 6th April 2007? Or is there anything that could be done this financial year?

Jimmo, we had not taken into consideration the length of property ownership and had not thought about the CGT implications so thank you for that.

We are still living together and we want to try and sort out as much as possible between us without incurring huge costs. Our property assets were to be our pension, so we want to divide equally and fairly and go our separate ways. As solicitors charge £250 a hour, we thought it would be better to be armed with knowledge before the next appointment!

Should we also consult our accountants?

Sugarloaf

WHA wrote: »

Transfers of property between husband and wife are exempt from capital gains tax (and I understand exempt for stamp duty). As long as you transfer properties out of joint ownership and into either your own or your wifes name within the time limits, (I think within the tax year of permanent separation) then you have no CGT to pay.

Apart from our family home, the properties are not joint ownership but owned Tenancy in common with equal shares. Does the CGT ruling still apply?

exil

Sugarloaf wrote: »

Thank you for your replies.

We are at the initial stages of the divorce and I have had only one appointment with a solicitor. I was advised that transfer of property could take place between husband and wife without incurring CGT. As we have only just decided to get divorced, would it then be advisable for all of this to take place after 6th April 2007? Or is there anything that could be done this financial year?

Jimmo, we had not taken into consideration the length of property ownership and had not thought about the CGT implications so thank you for that.

We are still living together and we want to try and sort out as much as possible between us without incurring huge costs. Our property assets were to be our pension, so we want to divide equally and fairly and go our separate ways. As solicitors charge £250 a hour, we thought it would be better to be armed with knowledge before the next appointment!

Should we also consult our accountants?

You could try the "Family" forum on MSE, there are several divorce threads on there.

Have a relative in the same boat. My advice to them and you is to avoid litigation - that is, come to an agreement, using mediation if necessary. Try for a clean break, but if not possible any ongoing payment does need to be backed by a court order. Avoid the CSA but use their rules as a guideline.

Sugarloaf

Jimmo, thank you for the information, but I had to laugh at your paragraph re the Biblical overtones. I hope you never find out what its like when you are going through a divorce, things are getting nasty! You definately don't stay in any room at the same time with your partner, let alone anything else. Trying to keep civil is bad enough! However, neither of us has anywhere to go until our home is sold, and neither of us can keep our home because the repayments are too great for one person. We will therefore both have to move out at the same time when the house is sold.

Not really sure what other people would do in these circumstances and I don't really know what to do for the best. Maybe it would be better to just sell everything and divide what's left after everything has been paid. I just don't know what to do. My husband is obviously going to want to keep the properties as running them are his source of income but I do have a job.

I am trying to sort out in my head what it all means and what would be best for me and our daughters in the future. Somebody also mentioned to me that the only way to get a transfer of property would be if the mortgage was paid on it.

Anyway I never thought of consulting an accountant, so I'll do that as well.

Thanks.

Sugarloaf

I appear to be in a pretty serious position then as far as the IR are concerned, the timing is completely wrong. It all boils down to when/what tax year we ceased to live together as man & wife, regardless of whether we are in the same house or not. So if we can't transfer by the 5th April 2007 we are liable to pay CGT next tax year.

It would therefore have been better if we were still living together as man and wife and weren't thinking about divorce until after 6th April 2007. How does the IR know when you cease to live together as man & wife?

But because we are so near the year end, would it then instigate a tax investigation?

Sugarloaf

Jimmo, I just had another thought - what if we continued owning the rental properties as Tenants in Common after divorce? He could continue his business of managing them and my name would still remain on the deeds. How would that affect any tax implications?

debbenliciben

You know it sickens me we pay tax on every aspect of living in this country. Then you reach a crisis in your life like divorce and the taxmans there again knocking at your door, but if your clued up and know how to screw the system you dont have to pay it. All through life paying tax on this tax on that and what for to keep foreigners here scrounging if the foreigners paid there way we wouldnt have to be taxed on everything.:mad:

Sugarloaf

Jimmo, you have helped me enourmously and saved me a great deal of stress in the future. If I had carried out the solicitors advice, without checking on this site, I could have got myself in a right pickle!

Now where do I find out how to work out CGT :eek:

Thanks again
Sugarloaf

Sugarloaf

Jimmo, don't worry I will take my solicitors and accountants advice - I just didn't really understand it all. But now I do understand the implications regarding CGT and IR investigations had I agreed to transfer. I tried to find out everything I could, which then enabled me to make an informed decision. The money saving aspect came in, because I was able to discuss it and understand it here and not have to pay £250 an hour to my solicitor and haver her explain it to me. Strangely enough its easier to discuss with a stranger than a member of your family!

It now seems to me that it would be better for me to request that everything is sold, pay the CGT and divide what's left. That way I can get on with the rest of my life.

Thanks.