Transfers of assets between spouses or civil partners are generally exempt from an immediate Capital Gains Tax (CGT) charge. Where an asset is gifted or transferred between spouses or civil partners, the disposal is normally treated for CGT purposes on a “no gain, no loss” basis.
This means that no CGT is payable at the time of transfer. Instead, the receiving spouse effectively inherits the transferring spouse’s original acquisition cost and ownership history. When the asset is eventually sold to a third party, any capital gain will be calculated by reference to the original purchase price rather than the market value at the date of transfer. It is therefore important to retain records of the original acquisition cost and associated documentation.
There are, however, some important exceptions to this treatment.
The no gain/no loss rules generally do not apply where spouses or civil partners are separated and have not lived together at any point during the tax year in which the transfer takes place. In addition, the relief is not available where assets are transferred as trading stock for use within the recipient’s business. In these circumstances, the transfer is normally treated as taking place at market value and may give rise to an immediate CGT liability for the transferor.
Similar principles apply to gifts made to charities. In most cases, outright gifts to qualifying charities are exempt from Capital Gains Tax. However, where an asset is sold to a charity for consideration that exceeds the original acquisition cost but is below market value, a chargeable gain may still arise based on the actual sale proceeds received.
As with all CGT matters, the timing of the transfer and the nature of the asset can significantly affect the outcome, so professional advice should be sought where material values are involved.
