CG17906 - Taper relief: qualifying holding period: assets transferred between spouses or between civil partners

TCGA92/SCHA1/PARA15, TCGA92/S58

TCGA92/SCHA1/PARA15 provides special rules for assets transferred between spouses or between civil partners where TCGA92/S58 applies.

Under TCGA92/S58, see CG22200+, an asset transferred between spouses or between civil partners passes without triggering a gain, or loss, at the time of the transaction. This is a disposal by the transferor spouse or civil partner and an acquisition by the transferee spouse or civil partner. The gain or loss on any later disposal takes account of the change in the asset's value while owned by both spouses or by both civil partners. The qualifying holding period for taper relief will be the total period of ownership of both spouses or civil partners falling after 5 April 1998. The effect of paragraph 15 is to ignore the disposal and acquisition in calculating the qualifying holding period.

- EXAMPLE

Asset acquired by Mr A on 1 March 1998.

Asset transferred to Mrs A on 31March 1999.

Asset disposed of by Mrs A on 16 June 2001.

Gain on disposal of asset held as a non-business asset throughout the total period of ownership of Mr and Mrs A, £70,000.

Mrs A has a qualifying holding period that includes 3 whole years + the bonus year. Four years taper relief is therefore due.

90 per cent of the chargeable gain will be included in the taxable amount.

The amount chargeable to Capital Gains Tax is £63,000 (£70,000 x 90 per cent).

CG17943 and 17945 explain when shares and other assets are business assets where there has been an asset transfer between spouses or between civil partners within TCGA92/S58.

Where the disposal within S58(1) is shares, the share identification rules, see CG50500+, will still apply to treat any transfer as an acquisition by the transferee spouse or by the transferee civil partner even though TCGA92/SCHA1/PARA15 calculates taper relief based on the combined period of ownership by the transferor and transferee spouses or civil partners.