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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
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Gifts: hold-over relief: consideration

The disposal of an asset from one spouse or civil partner to the other in the circumstances described in CG67191 is, where there is no recourse to the courts, usually made in exchange for a surrender by the donee of rights which they would otherwise be able to exercise to obtain alternative financial provision. In such cases we take the view that the value of the rights surrendered represents actual consideration of an amount which would reduce the gain potentially eligible for hold-over relief to nil. `Consideration’ is not limited to money or money’s worth.

Exceptionally, it may be possible for the parties concerned to demonstrate that there was a substantial gratuitous element in the transfer. It should be made clear that the onus is on the parties concerned to demonstrate that this was the case, and in particular that the amounts transferred were substantially in excess of what the recipient’s spouse or civil partner could reasonably have expected to have received as the result of a contested court case.

However, in cases where there is recourse to the courts and a court makes an order

  • for ancillary relief under the Matrimonial Causes Act 1973 which results in a transfer of assets from one spouse to another, or
  • for property adjustment under the Civil Partnership Act 2004, or
  • formally ratifying an agreement reached by the divorcing parties or by the civil partners of a dissolved civil partnership dealing with the transfer of assets,

we take the view that the spouse or civil partner to whom the assets are transferred does not give actual consideration, in the form of surrendered rights, for their transfer. A Court Order, made in these circumstances, reflects the exercise by the court of its independent statutory jurisdiction and is not the consequence of any party to the proceedings agreeing to surrender alternative rights in return for assets.

This approach represents a change in the Revenue’s prevailing practice, following consideration of judicial observations made in the case of G v G [2002] EWHC 1339 and applies with effect from 31 July 2002. Therefore, where assets are transferred between divorcing parties or between civil partners of a dissolved civil partnership by reason of a Court Order as described above and a claim for gift hold-over relief is made, or remains unsettled, on or after that date, the relief should not be restricted in accordance with TCGA92/165(7) on the grounds that actual consideration has been given by the donee.