What would changes to CGT rules mean for divorcing couples?

Even the question of when the date of separation was can be incredibly distressing for the individuals involved – not to mention often disputed.

The reality is far from ideal, often requiring a couple in the very early stages of a separation to either make a snap decision about the transfer of assets and rush through the administration to do that, without full advice or consideration of the overall outcome, or to face a tax liability when they do reach an agreement. 

Not only is the April deadline completely arbitrary as far as relationships are concerned, and manifestly unfair in that it penalises one couple relative to another simply based upon when their marriage breaks down, but in certain circumstances it can and does discourage people from doing what might be best for their own welfare, the welfare of their spouse, or their children.

Perhaps the most apparent example of this is one person not able to move out of their shared family home, regardless of the difficult situation that this puts their family in on a daily basis, because they are aware that this will begin a countdown that could ultimately end with them facing a punitive tax bill.

Emotionally volatile 

Both of the above concerns assume that separated couples have some knowledge of the potential CGT implications and can take steps as needed, even if those lead to an entirely unsatisfactory outcome. However, we should not assume that many are aware of this rule.

The nature of relationship breakdowns is that they are highly emotional and unpredictable. Even the question of when the date of separation was can be incredibly distressing for the individuals involved – not to mention often disputed.

Emotions can often play an overriding role in any decision-making that the two people make in this situation, particularly in the very early stages when they are making decisions every day about the care of their children and payment of outgoings in this new scenario.

In this context, it is entirely unreasonable and unrealistic to expect people to make rational decisions about transfers of assets and possible future tax liabilities.

Often such a complication is missed entirely as a result; experience tells us that many divorcing couples who do not receive professional advice very early in the process are not aware that their decision to move out of the family home could ultimately trigger a CGT bill. 

It is entirely unreasonable and unrealistic to expect people to make rational decisions about transfers of assets and possible future tax liabilities.