Partner Article

Taxation complexities in marital discord

Recently we’ve been instructed in a divorce case to give an expert opinion of the Capital Gains Tax consequences of the sale of the family home.

Usually, of course, the position is straightforward; gains on the principal private residence are exempt. In the present case things are not quite so clear-cut: some years after acquisition the home was split so as to create two separate dwellings, one of which has been let out.

Will sale of the let property attract any measure of exemption at all? If so, how much? Does it matter if the two properties are held under separate titles or under a single title? To what extent can the liability be reduced?

Indeed, procedurally, to what extent does it lie within the duties of the expert (whose over-riding duty is to the Court, of course, and not to the parties giving the instructions) to draw attention to methods by which the taxation liabilities on which he or she is asked to report may be mitigated even by some simple straightforward planning?

All of this just goes to show how complicated even the most apparently simple things can become when they become the subject of dispute in the context of marital discord.

The particular case in question happens to be further complicated by the question of the availability (or possibly non-availability) of losses arising from loans and guarantees to trading businesses.

Interestingly, there’s a crucial difference between them: losses on loans (where they are allowable at all – but that’s another story) can in principle be claimed at any time after they become irrecoverable: but tax relief for payments under a guarantee must be claimed within a strict time-limit after the payment is made. So the expert’s job becomes to look very closely at what happened when in order to establish the most likely outcome for tax purposes.

And then when you also add in the fact that the solicitors on opposing sides cannot quite agree on the facts on which the single joint expert is being instructed, the case becomes one of the more interesting ones with which we have had to deal…

Article written by Marjorie Hurwitz-Bremner of Berg Kaprow Lewis LLP.

This was posted in Bdaily's Members' News section by UK200Group .