CG22000 - Transfer of assets between spouses or between civil partners: separate but connected persons

Connected persons

Spouses and civil partners are connected with each other per S286(2) TCGA92, as well as with each other's relatives, as defined in S286(8) TCGA92, see CG14580.

S18 TCGA92 treats any transfer between connected persons as a transaction otherwise than by way of a bargain at arms length. Unless S58 TCGA92 applies, see below, S17 TCGA92 provides that the deemed consideration on the transfer is the market value of the asset transferred on the date of the transfer.

No gain/no loss treatment

Any transfer of an asset between spouses or between civil partners of each other who are living together is treated, with certain exceptions, by S58 TCGA92 as taking place for such consideration as will give neither a gain nor a loss to the transferor.

How this rule works is explained in more detail at CG22200.

Jointly owned assets

Whether the legal title to an asset is held by one or both of a married couple or by one or both of the civil partners within a civil partnership, the beneficial ownership of that asset is a question of fact. If you need to decide who is chargeable to Capital Gains Tax on the disposal of an asset by a spouse or by a civil partner you should consider the evidence available to determine which of them is the beneficial owner, or if both of them have a beneficial interest in the asset, what share each of them has.

Factors that may be helpful in determining beneficial interest include:

·         whether Form 17 has been submitted,

·         who provided the cost price and received the disposal proceeds,

·         whether the asset was the couple's home.

               

Form 17

If the beneficial ownership of an asset is divided other than equally between the couple and the split of the beneficial ownership of both the asset and the income from it is identical, the couple can make a declaration under S837 Income Tax Act 2007 on Form 17 stating what that split is.

If such a declaration has been made you should treat it as evidence of the existence of an express agreement concerning the ownership of the asset and you should follow that split in assessing the gains on the disposal of that asset.

A couple cannot make a declaration where the split of beneficial ownership of the asset and of the income from it differ.

A declaration is not mandatory, and so you should not take the absence of a declaration as being evidence that the beneficial ownership is split evenly. However, you should follow the advice below if there is no declaration and no claim is made that the beneficial ownership is unevenly divided.

Cost contributions and disposal proceeds

If one spouse or civil partner paid all of the cost of the asset and it is held in the name of that spouse or civil partner alone it may be assumed, in the absence of evidence to the contrary, that he or she is the sole beneficial owner. This assumption may be wrong if the asset was acquired as a gift for the other spouse or civil partner,.

Similarly, if the disposal proceeds are retained by one spouse or civil partner it may be evidence that he or she was the sole beneficial owner of the asset which was disposed of.

Other considerations

The Courts have substantial powers to recognise the equitable interest of a spouse or civil partner in the matrimonial or civil partnership home to the extent of their contribution to providing that home. You should not overlook the possibility that a spouse or civil partner has an equitable interest in a home to which he or she has no legal title. This is covered in more detail at CG65310+.

If no factual evidence is available to determine each spouse's or civil partner's beneficial interest in an asset you should assess the spouse or civil partner with legal title, or if they have joint legal title, assess each of them as a holder of a half interest in the asset.