Divorce & CGT

Silly_Cow

Please forgive me if this is against forum etiquette but I posted the question below into the Families board but it appears most CGT questions are in this board instead so I've re-posted.

Hi all,

I'm a regular "lurker" here but I now have the urgent need to ask some advice.

My final hearing for ancillary relief was on Monday but, in line with the whole proceedings so far, it still hasn't been settled and I'm back in court next Wednesday for the final final hearing.

The judge was unimpressed that my solicitor had, as he put it, shrugged her shoulders over whether I'd be liable to CGT. I need to turn up with hard fact on Weds.

The HMRC website has some very detailed explanations regarding CGT but none of the scenarios seem to fit my case. Please, please can someone here point me in the right direction?

Briefly, my husband and I bought our house in joint names in 2002 for £297,000. It is now worth £400,000. We separated January 2006 but stayed in the same house. In June 2006 I bought a house for £142,000. It is now worth £160,000. I moved into it in October 2006.

As he is very cash comfortable, the likelihood is that I will get all the equity on the sale of both houses. If this is the case, am I liable to CGT?

I'd be grateful for any advice or help.
Many thanks

Bean_Counter

I'm not the CGT expert and no doubt some others will come along soon, but as you were looking for urgent advice, I thought I'd have a go.

Regarding the first property, as this was your main residence up to October 2006, assuming it is sold before October 2009, it would still qualify for Private Residence Relief from CGT.

The property you have bought, presuming this remains your main residencem will also be free of CGT.

Good news is that you should have no CGT to pay.

Have a look at this link for more information.

Silly_Cow

Thanks for the quick reply and the link, Bean Counter. I'm so glad the news seems to be good news.

silvercar

I agree with beancounter.

You may want to point out to the judge that, if the sale delays beyond October 2009, there could be a potential liability.

jimmo

I see Bean Counter has already given you a link to the IR 283 which is very useful but especially with separation and divorces it may not be as simple as that.
I think you, personally, will not be liable to Capital Gains Tax on the sale of the matrimonial home provided it is sold within 3 years of your moving out.
You will also be exempt from Capital Gains Tax on the sale of your present home.
As always the devil is in the detail and my worry is when you say “As he is very cash comfortable, the likelihood is that I will get all the equity on the sale of both houses. If this is the case, am I liable to CGT?”
If your (ex) husband has an equitable interest in your present home then the occasion when he disposes of his interest in the property will be a chargeable occasion for Capital Gains Tax purposes. He’s never lived there and cannot claim exemption. That applies regardless of whether he gifts his interest to you or the property is sold and he gifts to you his equitable share of the proceeds.
On the basis of the figures you have posted there’s not going to be a huge gain but he may well face some liability.
That is the end of my claimed professional expertise.
As a personal opinion, I would be really worried if a judge had criticised my solicitor for shrugging her shoulders regarding Capital Gains Tax. As a taxman I recognise that CGT is a specialist subject and know that, of the solicitors I have encountered, there were one or two who were really very good but most didn’t have a clue. However the vast majority of those realised their own limitations and brought in accountants.
Whilst you’re (ex) husband’s CGT liability is not your direct concern it could suddenly be a reason for further adjournments.
I firmly believe that the only winners in divorce proceedings are the lawyers and if yours has upset the judge….

If you want to some research start here. Just keep going to the next page. http://www.hmrc.gov.uk/manuals/cg4manual/cg65300+.htm

Silly_Cow

jimmo wrote: »

I firmly believe that the only winners in divorce proceedings are the lawyers and if yours has upset the judge….

Hear hear! Unfortunately, it has got to this almost ridiculous stage as my ex has failed to engage in any proceedings whatsoever. This meant me forking out £1000 for a barrister for the final hearing as the solicitor wasn't capable of finalising my case. The CGT thing was, I think, the straw that broke the camel's back for the judge. My solicitor also failed to advise me to get my ex's company accounts which are readily available as a 5 minute download from Companies House. The judge even gave us a half hour adjournment to get the information but my solicitor said she tried but couldn't do it. I'm now expected to pay another £500 for the barrister to turn up again next week! Now I'm nosing ahead of the judge in the Unimpressed With the Legal Team Stakes.:mad:

Anyway, that's all an aside.

jimmo wrote: »

If you want to some research start here. Just keep going to the next page. http://www.hmrc.gov.uk/manuals/cg4manual/cg65300+.htm

Thanks for that link, Jimmo. It looks like my weekend will be taken up reading through it all and learning about equitable interests et al. I will learn these terms if it kills me!

Thanks also for the rest of your reply. It's very much appreciated:T

And thank you, silvercar, too.:T

missile

I think you need a new solicitor. You may have a case for compensation from the solicitor, but your chances of getting that are very slim.

Silly_Cow

Missile, with hindsight I'd have got a new solicitor months ago but hindsight's a wonderful(ly frustrating) thing.

jimmo

Good luck on the research.