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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Transfer of assets: between husband and wife or between civil partners: separation, divorce or dissolution: value of consideration where date of disposal is after decree absolute or after the date dissolution is made final

Following the decree absolute a former husband and wife are no longer connected persons by virtue of their former marital relationship. Equally following the date the dissolution order is made final, former civil partners are no longer connected persons by virtue of their former relationship. Although it should be noted that the parties may still be connected persons for some other reason, for example, they might be in partnership and so connected persons by virtue of TCGA92/S286 (4).

In circumstances where the parties are no longer connected you may normally accept that a subsequent sale of an asset by one to the other is a transaction at arm’s length. If, exceptionally, the sale price seems to differ substantially from the expected market value, this may be indicative of a bargain which is not at arm’s length, see CG14540+.

However if the disposal between them is in pursuance of a court order, TCGA92/S17 (1) would still apply to the transaction to deem the disposal consideration to be equal to the market value of the asset at the date of disposal. This is because a court order is not a ‘bargain’ between the parties; it is the court who decides on the terms, not the parties to the order. Coleridge J confirms this interpretation in his comments in the non-tax case of G v G,

“In an ancillary relief hearing neither party has any rights as such at all: all the powers are vested in the court which may or may not exercise them. The parties may make suggestions as to how those powers are to be exercised. That is all. So when I order a transfer of shares in favour of the wife on a clean break basis she is not “giving up” her claim for maintenance as a quid pro quo. I am simply exercising my statutory powers in the way I consider to be fair. This would be equally the case where the court was making a consent order, for although the parties may have made their agreement it is for the court independently to adjudge its fairness.”

Therefore, where an asset is transferred in pursuance of a court order after decree absolute or dissolution when the parties are no longer connected by virtue of TCGA92/S286 (2), the disposal proceeds will be deemed to be equal to the market value of the asset by virtue of TCGA92/S17 (1).