ChatterBank2 mins ago
Settlement after separation
My partner and I decided after 15 years to separate.We joimtly own the house we are living in (valued at around £180,0000) and my partner owns two other properties that she lets to tenants. These are worth about £90,000 each. She does not want to sell our joint property as she wants to continue living there so I suggested that she gives me one of her two rented properties which would roughly equate to the value of my share of our communal home. Clearly that would mean waiting for one of them to become vacant which is not a big problem.
The problem is that her two rented properties were bought about 15 years ago when they were valued at around £25,000 each, so have appreciated substantially since their original purchase. If she gave me one of them in full settlement, would the swap be treated as a sale in which case she would have to pay capital gains tax on the appreciated value? If so, then the arrangement, whilst being OK for me, would not be a good deal for her in which case I would have to insist on the sale of our joint property, or get her to buy me out which she would find difficult! All I want (all we both want) is a fair outcome!
The problem is that her two rented properties were bought about 15 years ago when they were valued at around £25,000 each, so have appreciated substantially since their original purchase. If she gave me one of them in full settlement, would the swap be treated as a sale in which case she would have to pay capital gains tax on the appreciated value? If so, then the arrangement, whilst being OK for me, would not be a good deal for her in which case I would have to insist on the sale of our joint property, or get her to buy me out which she would find difficult! All I want (all we both want) is a fair outcome!
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The value of the solely and jointly held assets (including pensions) minus any liabilities form the net value of matrimonial property to be shared. When spouses were living together at some time in a tax year, assets can be transferred between them at any time in that tax year at no gain/no loss.
http://www.hmrc.gov.uk/helpsheets/hs281.pdf
However, there will be CGT liability for the years the property wasn't the main private residence and it should be factored into the equation.
Within reason you can agree between you to divide the assets how you wish, but you should be aware that splitting them in England & Wales 50:50 is an oversimplification of the law at this time. It only applies when (a) there are enough assets to meet the 'needs' of both parties and (b) there has been no exceptional contribution by one party to justify moving away from 50:50 as per the case of White v White [2001] When there aren't enough assets the checklist of factors in s25 Matrimonial Causes Act 1973 is referred to and usually needs comes at the top, or very near the top, of the list.
http://www.hmrc.gov.uk/helpsheets/hs281.pdf
However, there will be CGT liability for the years the property wasn't the main private residence and it should be factored into the equation.
Within reason you can agree between you to divide the assets how you wish, but you should be aware that splitting them in England & Wales 50:50 is an oversimplification of the law at this time. It only applies when (a) there are enough assets to meet the 'needs' of both parties and (b) there has been no exceptional contribution by one party to justify moving away from 50:50 as per the case of White v White [2001] When there aren't enough assets the checklist of factors in s25 Matrimonial Causes Act 1973 is referred to and usually needs comes at the top, or very near the top, of the list.
My partner and I were never married, just co-habiting. The two rented houses were never lived in by either of us, just bought by my partner with money earned/aquired before our relationship began. I have never considered that these properties were in any way a joint asset. So from what you said it would seem that she couldn't just swap her £90,000 equity in one of her properties for my £90,000 equity in our joint home so that we can go our separate ways?
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