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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Transfer of assets between husband and wife: definitions

The position is slightly different in Scotland to that in England, Wales or Northern Ireland. In Scotland a marriage `by habit and repute’ is regarded as a legal marriage once there has been a declaration before the Court of Session, even though the couple have been through no marriage ceremony. You should accept that a couple are husband and wife if there has been such a declaration.

A polygamous marriage may be recognised as valid in United Kingdom law if it was valid in the country in which the ceremony occurred and, broadly, it was contracted by persons domiciled in that country. In these circumstances the husband will be connected with each wife under Section 286(2). A transfer between a husband and any wife with whom he is living will be within TCGA92/S58 and so will be at no gain/no loss.

The Civil Partnership Act 2004 has effect from 5/12/05. A civil partnership is a relationship between two people of the same sex (“civil partners”) and is formed when they register in the UK as civil partners of each other according to procedures set out in the Act.

Subject to conditions set out in the Act, two people of the same sex who have registered an overseas relationship in country or territory outside the UK are treated as having formed a civil partnership. The date of formation is taken as the time the overseas relationship is registered as having been entered into or, if later, 5/12/05.

Living together

A transfer of an asset between husband and wife or between civil partners of each other will be at no gain/no loss if they are living together. The phrase `living together’ has a statutory definition provided by ITA 2007/S1011, which is applied to Capital Gains Tax by TCGA/S288 (3).

A married couple or civil partners of each other are treated as living together unless

  • they are separated under an order of a Court,

or

  • they are separated by a formal Deed of Separation executed under seal (except in Scotland where the deed should be witnessed),

or

  • they are in fact separated in such circumstances that the separation is likely to be permanent.

All three alternatives require that the husband and wife or civil partners shall be separated, that is, that the marriage or civil partnership should have broken down. If the marriage or civil partnership has not broken down but the couple do not reside in the same house they are still treated as living together for Capital Gains Tax purposes.

The date of separation is most frequently relevant for determining whether an asset transferred from one spouse or civil partner to the other can be treated as having been transferred for such consideration as gives rise to neither a gain nor a loss. Where the asset is transferred in the year of separation see CG22202.