Transferring a property free of capital gains tax on divorce

It's usually the case that on a divorce the previous main residence is to be transferred into the name of one of the spouses. This would need to be carefully considered in tax terms as it could easily lead to a CGT charge. Unless any transfer between the spouses is made in the tax year of separation (when it would be exempt from CGT) a transfer of an interest in a property from a spouse that has moved out to the spouse that lives in it could crystallise a Capital Gains Tax charge. In particular if the spouse that has moved out has been absent for more than three years the usual deemed periods of occupation won't cover the gain. This is most likely to arise where a couple separate and then agree to divorce and sort out their affairs formally a number of years later. The Revenue do however provide for this charge to be mitigated in appropriate cases by ESC/D6. The concession applies where:

as part of a financial settlement

on separation or divorce

the spouse who has ceased to occupy the matrimonial home

transfers an interest in that home to the other spouse The effect of the concession is to allow the former matrimonial home to be treated as the only or main residence of the transferring spouse from the date his or her occupation ceased until the earlier of:

the date of transfer and

the date on which the spouse to whom the property is transferred ceases to use it as his or her only or main residence. This is a useful concession to claim as it can relieve what could be a significant amount of CGT. Of course if the non occupying spouse has purchased another main residence you'd need to be careful in electing for the concession as it could reduce relief on the other property.