The following Family practice note Produced in partnership with David Salter, deputy High Court judge and Recorder provides comprehensive and up to date legal information covering:
With effect from 6 April 2000, all maintenance arrangements or periodical payments are subject to the same tax treatment (irrespective of when the maintenance order was made), whether the maintenance was agreed privately or calculated by a statutory service, and regardless of any variation of the arrangement. Maintenance payments qualify for a limited tax relief only where either the payer or recipient was born before 6 April 1935. Therefore, except for this limited concession for older taxpayers, maintenance is tax free to the recipient, and the payer receives no tax relief on their payments.
Payments of maintenance are specifically excluded from the inheritance tax (IHT) regime.
These payments are generally ignored for IHT and income tax purposes. The main tax issue surrounding such payments concerns capital gains tax (CGT), where assets must either be sold or transferred to the other spouse/civil partner in order to fund the lump sum payment.
The tax treatment concerning the disposal of assets depends on whether these are transferred to the other spouse/civil partner in the year of separation, or afterwards, or to a third party, as well as the nature of the assets being realised.
Transfers of business assets may give rise to additional tax issues.
For CGT purposes, the transfer of business assets (within the tax meaning of the term, generally, assets used in an unincorporated business or shares in an
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