Here Andrew Stant, Partner at accountancy firm Johnson Murkett & Hurst of Ashby de la Zouch, talks to us about the effect on capital gains tax if a partnership breaks down.
"My last article covered the very basics of capital gains tax on the sale of let property.
One issue which often arises is the tax position on marriage breakdown. Tax will rarely be high on the agenda for the couple to think about but it should always be considered where the couple own a let property.
One spouse may agree, as part of a divorce settlement to transfer their ownership to the other spouse but unless this is done in the same tax year that the couple separate, the donor spouse may incur a charge to capital gains tax.
This may be a problem if the let property has been owned for many years and would have resulted in a gain had it been sold on the open market. The position is more problematic if the married couple own a number of rental properties and in this case it may be advisable to consider transferring the ownership in different tax years to make maximum usage of the annual capital gains tax exemption of £11,300. The financial settlement on divorce will often factor in the possible capital gains tax payable on the sale of a property but it is a cost that may be mitigated with some careful planning."
For more in depth advice in this area, contact Andrew on 01530 412877.