As a tax on divorce specialist, I mostly prepare tax reports for the Family Court. At the moment, I am working on various reports covering taxes on large property portfolios, tax implications on family company restructuring and the impact of an ongoing HMRC enquiry.
In addition to this, I am undertaking more work as a financial neutral in mediation and collaborative divorce cases. This work is really interesting as you see the direct impact the advice has, and in cases where there is a large tax liability you can talk through some other options which the clients may not have previously considered.
If you could make one change to tax law or practice, what would it be?
I would change the tax law regarding the no gain/no loss treatment for married couples ending after the tax year of separation. So few divorces are finalised within a year and this current law means that any transfers post the tax year of separation are likely to attract a CGT charge. For example, couples who separate in February only have a couple of months to affect transfers before the deemed market value rules apply. This is a bizarre quirk of the tax system. To me, taxing individuals on a transfer when there is likely to be limited cash available feels a harsh treatment.
Are there any new rules that are causing a particular problem?
This is not a new rule, as such, but a change in HMRC guidance regarding holdover relief on divorce. The updated guidance cites Haines v Hill [2007] EWCA Civ 1284, and broadly says that where there is a transfer on divorce which has been agreed by way of a court order, the transferring spouse is deemed to have received consideration for the value of the asset.
In brief, holdover relief is not available if consideration has been received and this extends to deemed consideration. Holdover relief was a valuable and much used relief in cases where couples were divorcing and they had a family business. This is, of course, only a change in guidance and not in law; however, HMRC’s change in view suggests that many couples may face large CGT charges when transferring shares/business assets (assuming these transfers fall outside of the tax year of separation).
What consultation results are you looking forward to reading?
There has been a recent move to make the renewal of certain licences conditional on applicants confirming they are appropriately registered for tax. For example, a driver may not be able to secure an Uber licence without showing that they are registered for self-assessment. Finance Bill 2021 contains provisions implementing these changes in England and Wales with effect from April 2022, and there is now a consultation on introducing similar reforms in Scotland and Northern Ireland effective from April 2023. This topic has already caused a debate within my household, and it is interesting to consider some of the practical issues. Will tax conditionality push some people to work without licences? And if some people’s work is conditional on proof of tax registration, does the turnaround time for a UTR number need to be quicker than up to eight weeks?
Finally, you might not know this about me but…
I absolutely love reading and have recently joined a virtual book club just for tax professionals. I’m totally delighted to find a club which combines two of my favourite things.
As a tax on divorce specialist, I mostly prepare tax reports for the Family Court. At the moment, I am working on various reports covering taxes on large property portfolios, tax implications on family company restructuring and the impact of an ongoing HMRC enquiry.
In addition to this, I am undertaking more work as a financial neutral in mediation and collaborative divorce cases. This work is really interesting as you see the direct impact the advice has, and in cases where there is a large tax liability you can talk through some other options which the clients may not have previously considered.
If you could make one change to tax law or practice, what would it be?
I would change the tax law regarding the no gain/no loss treatment for married couples ending after the tax year of separation. So few divorces are finalised within a year and this current law means that any transfers post the tax year of separation are likely to attract a CGT charge. For example, couples who separate in February only have a couple of months to affect transfers before the deemed market value rules apply. This is a bizarre quirk of the tax system. To me, taxing individuals on a transfer when there is likely to be limited cash available feels a harsh treatment.
Are there any new rules that are causing a particular problem?
This is not a new rule, as such, but a change in HMRC guidance regarding holdover relief on divorce. The updated guidance cites Haines v Hill [2007] EWCA Civ 1284, and broadly says that where there is a transfer on divorce which has been agreed by way of a court order, the transferring spouse is deemed to have received consideration for the value of the asset.
In brief, holdover relief is not available if consideration has been received and this extends to deemed consideration. Holdover relief was a valuable and much used relief in cases where couples were divorcing and they had a family business. This is, of course, only a change in guidance and not in law; however, HMRC’s change in view suggests that many couples may face large CGT charges when transferring shares/business assets (assuming these transfers fall outside of the tax year of separation).
What consultation results are you looking forward to reading?
There has been a recent move to make the renewal of certain licences conditional on applicants confirming they are appropriately registered for tax. For example, a driver may not be able to secure an Uber licence without showing that they are registered for self-assessment. Finance Bill 2021 contains provisions implementing these changes in England and Wales with effect from April 2022, and there is now a consultation on introducing similar reforms in Scotland and Northern Ireland effective from April 2023. This topic has already caused a debate within my household, and it is interesting to consider some of the practical issues. Will tax conditionality push some people to work without licences? And if some people’s work is conditional on proof of tax registration, does the turnaround time for a UTR number need to be quicker than up to eight weeks?
Finally, you might not know this about me but…
I absolutely love reading and have recently joined a virtual book club just for tax professionals. I’m totally delighted to find a club which combines two of my favourite things.
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