Our experts at DSR Tax Claims know how hard it is to find good, quality information about HMRC’s tax regulations that is easy to understand, and that’s why we have created these handy guides to tell you everything you need to know. Our aim is to make life easier for our clients and that is why we want to share our expertise with you. You can also call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.
How to come to a financial agreement at the end of a relationship?
It’s very often sad and complicated when a relationship comes to an end, and having to sort out the financial side of a split can often make things worse. If you can come to an agreement with your ex-partner, things will run much more smoothly for you both.
You and your ex-partner can choose how to sort out your finances, whether you divorce or end a civil partnership, and if you can agree between yourselves, you can usually avoid the courts getting involved. Any agreement you come to can be made legally binding, with the help of a solicitor and at the same time you can, if you wish, come to an agreement about child maintenance.
To help you both come to an agreement, there are a few things you can do:
You can use a divorce and separation calculator to work out your finances – these are available online.
You can check out the guides available to help you reach an agreement.
You can also use a mediator, who can help you to reach an agreement that works for both of you.
What happens if you can’t agree on everything?
If there are any aspects of your finances that you can’t agree on, you can ask the courts to decide instead. This would be a last resort after mediation – it is usually in your own best interests to attempt to reach an agreement without the courts.
The courts will want to know that you have attempted mediation first, unless there has been domestic abuse in the relationship or social services are involved in your personal circumstances. If this is the case, you won’t be able to use a mediation service and the courts will need to decide on your behalf.
If you need legal advice, your best option is to see a solicitor but you won’t be able to get legal aid unless you are leaving a relationship where you have been abused by your partner. You can also get advice from Citizens Advice.
What happens if you come to an agreement?
If you do come to an agreement on how to divide your money and property, there’s no need to fill in any kind of official paperwork. You can just get on with it yourselves – but be warned, it isn’t legally binding, so you might want to get a solicitor to make the agreement legally binding.
To do this, a solicitor will draft what is called a ‘consent order’ and get it approved by a court so that it is legally binding. The ‘consent order’ is a legal agreement, explaining how you have divided the assets of your relationship. It takes in to account such aspects as money, savings, property and any investments you may have and can also include maintenance (including child maintenance) arrangements if you wish.
Are there any deadlines for making a consent order?
There is a timeframe in which you have to get the consent order approved. You need to have already started the paperwork to begin the divorce process or bring your civil partnership to an end, but it needs to be approved before the divorce is final – that means before your decree absolute has been applied for (or in the case of a civil partnership, the final order). You have to get your consent order approved within this window of time.
How do you get your consent order approved?
Firstly, both you and your ex-partner have to sign the consent order for it to be approved. But you will also both need to complete a couple of forms too:
A notice of an application for a financial order
A statement of information form.
These forms need to be sent, along with the signed consent order, to whichever court is dealing with your divorce (or ending of civil partnership) paperwork. It’s really important to keep copies of everything you send to the court. The consent order costs £50 although you might be able to get help with some of your court fees if you are on a low income.
Once you have sent all of the forms to the court, a judge will approve your consent order and make it a legally binding agreement – this depends on the judge believing it to be a fair order to both parties. There’s usually no need for any kind of court hearing to approve the order.
If the judge doesn’t believe that the order is fair to both parties, they can either change your consent order or make a new one which will tell both parties how joint money and property should be divided.
How can you get help to come to an agreement?
A good way to come to an agreement is through the use of a mediator. A mediator can help you and your former partner come to important agreements on how to split property and money without getting into any unpleasant arguments. The mediator is totally neutral and isn’t there to take one side or the other – mediation’s all about reaching a fair agreement to both parties. It isn’t the same as relationship counselling either – the intention isn’t to stop you from splitting, it’s to make sure the split is dealt with in a fair way to both parties. As a part of this, mediation can help you to agree on how you are both going to divide your assets, including money, property, savings and investments.
What you agree in mediation isn’t legally binding unless it then forms part of the consent order. The idea is simply to come to an agreement with each other so that you don’t need to get the courts involved – and incur the costs that come with that.
Sometimes mediation isn’t appropriate – for example, if there has been domestic abuse within the relationship. In those instances, the mediator will let you know that you can’t use the mediation service and that you will need to go to court to get an agreement instead.
You might be able to get legal aid for mediation under certain circumstances.
Other places you can get help without going to court are:
Seeking the advice of a legal adviser, who might be able to point you in the direction of other forms of help – such as a family arbitration service.
If you can’t agree on every single thing, you can get the courts to decide on those issues while still keeping the agreements you have made in mediation or between yourselves. Before you apply to the courts, you have to be able to show that you have tried to work it out yourselves through mediation (if it is appropriate of course – this doesn’t apply in cases where domestic abuse has been present or social services have been involved).
What happens if you can’t reach an agreement?
If you really can’t agree, you can ask the courts to make an agreement on your behalf, called a “financial order”. You have to show that you have tried to reach an agreement through mediation first – unless mediation isn’t appropriate, for example because domestic violence has been present in the relationship or social services have been involved in the domestic set up.
The deadlines for applying for a financial order are the same as for getting a consent order approved. You have the timeframe between starting the paperwork to divorce or end a civil partnership and before you apply for the final legal document (such as decree absolute or final order) to end the relationship.
How do you apply for a financial order?
A financial order will deal with issues such as:
Ownership of joint property
Setting up regular maintenance or child maintenance payments
Getting a share of your former partner’s pension.
Deciding upon a lump sum payment.
It costs £255 to apply and you need to send two copies of the ‘Notice of intention [to proceed with an application] for a financial order’ form to the court which is dealing with the rest of your divorce paperwork. You should also keep a copy for yourself.
When applying for a financial order, it is sometimes necessary to go to court (sometimes more than once). This means that it isn’t usually a quick process and can often take between 6 and 12 months as a process.
How are joint assets split by the courts?
The way that your assets are split between you and your ex-partner is decided by the judge. They will base that decision on how long you have been married as well as how old you both are, the ability each of you has to earn an income, the property and money in question, what each of your living expenses are and the standard of living you both have as well as the role that each of you took in the marriage or civil partnership, such as whether you were the primary carer or main breadwinner.
The judge then decides on the fairest way to split your assets although this depends on whether your assets are enough to cover the needs of everyone involved – for example, the judge will look to meeting the needs of any children first, if the assets aren’t enough to share equally among everyone.
What about maintenance payments?
If one partner has a higher income than the other, the judge will sometimes order them to make regular maintenance payments to the other person to cover their living costs – this is called a ‘maintenance order’.
This isn’t the same as a child maintenance order – these arrangements would be made separately by the Child Maintenance Service.
Maintenance orders can set payments either for a limited period of time or until one of you either dies, marries or enters into a new civil partnership. These arrangements can be changed if there is a change in circumstances, for example, if the person with the higher income loses their job, or the person who is receiving the maintenance payments has an increase in their income.
What are the tax implications of transferring property?
If you have read any of our guides on Capital Gains Tax, you will know that you don’t usually pay this tax on transfers of property or assets between husband, wife or civil partner – however, this isn’t as straightforward for any assets transferred after that relationship ends. You might find that you are liable for Capital Gains Tax on any assets such as shares, valuable personal possessions or property – although, if that property is your main home, it isn’t usually liable for Capital Gains Tax.
If you have lived together at any point during the tax year in which the asset was transferred, then the normal rules for husbands, wives or civil partners apply – meaning that you wouldn’t normally have to pay any Capital Gains Tax on those assets.
If you haven’t lived together at any point during that tax year, depending on the size of your gain (profit) you might have to pay Capital Gains Tax. You will need to get a valuation of the asset for the date it was transferred and then work out whether you have made a gain or a loss on that asset.
The tax year runs from 6th April to 5th April the following year.
If you transfer the asset after your relationship has officially ended, either by divorce or end of your civil partnership, you may have to pay Capital Gains Tax on any gains (profits) as the rules covering spouses or civil partners won’t apply to you anymore.
Expert help is invaluable in these circumstances because HMRC’s rules are so complex and complicated. Our team of tax preparation specialists, at DSR Tax Claims, can help so call us on 0330 122 9972. We will need to know the date of the decree absolute or civil partnership dissolution, details of any court orders concerning the transfer of assets and any other contract or paperwork showing the transfer of these assets.
How can DSR Tax Claims help?
We know that the end of a marriage or civil partnership can be a complicated and upsetting time, even with our helpful guide to tell you everything you might need to know. It’s all very well reading about it and knowing what HMRC’s stand on it is – but how do you apply that to your own circumstances? It can seem like an absolute minefield but help is always available and you don’t need to battle through this alone. Our team of experts at DSR Tax Claims are always on hand to help our client and our excellent standing with HMRC means that we can make sure you don’t fall foul of their regulations, while claiming your maximum tax relief. We can even take care of all that paperwork and deal with HMRC on your behalf too. Call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.