Planning between spouses and civil partners

By Tolley

The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Planning between spouses and civil partners
  • Capital gains tax
  • Jointly owned assets
  • Indexation allowance and inter-spouse / civil partner transfers
  • Inheritance tax
  • Stamp taxes

Passing assets between spouses or civil partners is generally tax-advantaged for inheritance tax and for capital gains tax purposes. However, there are some potential pitfalls to be aware of.

Capital gains tax

When an asset is transferred between spouses / civil partners there is a disposal by the donor for CGT purposes. Despite being treated as separate individuals for tax purposes, married couples and civil partners who live together are able to benefit from a special rule which allows them to transfer assets between them at a value that gives rise to neither a gain nor a loss. Utilising this rule is an important tax saving tool to ensure not only that annual exempt amounts are not wasted, but also that where CGT is payable, it is payable at the lowest possible rate. Where a disposal takes place on a ‘no gain, no loss’ it means that neither a gain nor a loss arises to the donor as a result of the disposal. The donor is deemed to have received proceeds from the donee spouse / civil partner equal to the cost of the asset (plus indexation allowance where relevant, see below).

TCGA 1992, s 58; Simons Taxes C1.202 (subscription sensitive)

This ‘no gain, no loss rule’, only applies to disposals between spouses / civil partners. It does not apply to transfersof assets between parents and children, brothers and sisters, or partners who are not married or in a civil partnership.

This ‘no gain, no loss’ treatment applies until the end of the tax year in which a couple separates. For example, if a couple separates part-way through the tax year 2019/20, any transfersbetween them up until 5 April 2020 will take place at ‘no gain, no loss’. ‘No gain, no loss’ treatment does not apply after 5 April 2020 because the couple are separated. The fact that

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