When a chargeable asset is transferred between two spouses or civil partners, there is a disposal by the transferor spouse / civil partner and an acquisition by the transferee spouse / civil partner for capital gains tax purposes. For simplicity, spouses and civil partners are referred to jointly as ‘spouses’ in this guidance note, but the commentary applies equally to both. For a discussion on the meaning of chargeable asset, see the Exempt assets for capital gains tax guidance note.
The disposal is deemed to take place at ‘no gain / no loss’ (which may also be written as NGNL) provided the couple is:
married or in civil partnership, and
living together during the tax year
TCGA 1992, s 58
In Scotland, a ‘common-law’ marriage is recognised as a legal marriage once there has been a declaration before the Court of Session (ie in the absence of a marriage ceremony). In Scots law, this is known as a marriage ‘by habit and repute’. Disposals between such a couple are also deemed to take place at no gain / no loss.
A no gain / no loss disposal is one where neither a gain nor a loss arises to the transferor as a result of the disposal.
A couple does not have to be physically living in the same house to be ‘living together’. As long as the marriage / civil partnership has not broken down, the couple are treated as living together for capital gains tax purposes even if they have separate homes.
The no gain / no loss proforma can be expressed as:
|Deemed proceeds||X||Balancing figure|
|Less: costs of sale||(X)|
|Costs of acquisition (or MV82 if held on 31 March 1982)||X|
|Plus: enhancement expenditure||X|
This can be written in a formula as:
Deemed proceeds = costs of acquisition or market value at 31 March 1982 + enhancement expenditure + costs of sale
This no gain / no loss rule applies only to