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Tax implications of divorce on rental properties

Q: My client and her husband are currently live together in their marital home. They are planning on going their separate ways which will culminate in an eventual divorce, they have rental properties held between them in joint tenancy and would like to take two away each rather than hold four as joint tenants. They are already aware that properties which are transferred in the year of separation up to the following 5th April still benefit from the no gain no loss provision given by virtue of s58 TCGA 1992, but are confused about the definition of ‘living together’ and what tax implications that could have.

A: The above couple are relying on a piece of legislation that requires them to be ‘living together’, so at what point are they no longer deemed to be ‘living together’? S288(3) TCGA provides the meaning of living together which takes into account the definition of s1011 ITA 2007, which suggests that a couple are treated as living together until they are in fact separated and this is likely to be permanent.

Living apart on a temporary basis might not suggest that any degree of permanency is involved until divorce proceedings are contemplated and it is at that point that s58 TCGA 1992 is no longer applicable.