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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
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Private residence relief: separation, divorce or dissolution of civil partnership: spouse or civil partner transferring interest

After a spouse or civil partner has moved out of the matrimonial or civil partnership home on separation, divorce or dissolution of the civil partnership, the individual may transfer his or her interest in that residence to the other spouse or civil partner as part of the settlement on divorce or dissolution. The transfer may be ordered by the Court or may be voluntary. The transfer is a disposal for Capital Gains Tax and a gain may accrue.

If the period between moving out of the matrimonial or civil partnership home and the transfer is longer than the final period exemption, see CG64985+, the gain will not qualify for full relief. So a charge to tax could arise at a time when funds are least likely to be available. The charge can be mitigated in appropriate cases by TCGA92/S225B for disposals on or after 6 April 2009. For disposals made prior to 6 April 2009, ESC/D6 applies.

TCGA92/S225B operates in the same way as Section 222(8) and ESC/D49 by deeming a dwelling house to be a residence for a specified period. However the individual must make a claim for Section 225B to apply.

TCGA92/S225B allows the former matrimonial or civil partnership home to be treated as the only or main residence of the transferring spouse or civil partner from the date his or her occupation ceased until the earlier of

  • the date of transfer

and

  • the date on which the property ceases to be the only or main residence of the spouse or civil partner to whom the property is transferred.

If the transferring spouse or civil partner has acquired another residence, it may be disadvantageous for a claim to be made for TCGA/S225B to apply. You can only allow relief on one residence for the same period and if relief is given on the former matrimonial or civil partnership home it will be lost on the other residence. There is an example at CG65375.