Revenue Note for Guidance

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Revenue Note for Guidance

1030 Separated spouses: transfers of assets

Summary

This section provides that where a person disposes of an asset to his/her spouse as a consequence of —

  • an order made on or following a judicial separation,
  • a deed of separation,
  • a relief order under the Family Law Act, 1995, or
  • an order of a foreign court, which is recognised as valid in the State, made on or following a divorce or legal separation of spouses,

a charge to capital gains tax does not arise unless the asset is part of the trading stock of a trade carried on by the spouse making the disposal. The section also provides that where the spouse to whom the disposal is made subsequently disposes of the asset, he/ she is treated as having acquired it at the time and cost at which it was originally acquired by the other spouse.

Details

Definition

(1) “spouse” is to be construed in accordance with section 2(2)(c) of the Family Law Act, 1995, that is, the term includes a person who is a party to a marriage that has been dissolved under the law of a foreign country or jurisdiction.

Disposals of certain assets between separated spouses

(2) Where one spouse disposes of an asset to the other spouse by virtue of or in consequence of —

  • an order made under Part II of the Family Law Act, 1995 following the granting of a judicial separation under that Act,
  • an order made under Part II of the Judicial Separation and Family Law Reform Act, 1989 on or following the granting of a decree of judicial separation where such order is treated by virtue of section 3 of the Family Law Act, 1995 as if it had been made under the Family Law Act, 1995,
  • a deed of separation,
  • a relief order within the meaning of the Family Law Act, 1995 made following a divorce or legal separation of spouses, or
  • an order or other determination of similar effect, (which is comparable to a relief order as mentioned above), of a foreign court made following the divorce or legal separation of spouses which is recognised as valid in the State,

then, subject to subsection (3), the asset is treated for the purposes of the Capital Gains Tax Acts as having been disposed of at a price which gives rise to no gain or loss to the spouse making the disposal.

(2A) The no gain/loss rule does not, however, apply if the spouse who acquires the asset (from the other spouse) could not be taxed in the State (for the year of assessment in which the acquisition took place) on a disposal of the asset in that year and a gain had accrued on that disposal. Such a scenario might arise where the taxing rights on such a disposal, under a Double Taxation Agreement, rested with a foreign jurisdiction.

Relief disallowed for trading stock

(3) The no gain/no loss treatment provided for in subsection (2) does not apply if the asset disposed of is one which formed part of the trading stock of the spouse making the disposal. Likewise, that treatment does not apply if the asset is one which is acquired as trading stock for the purposes of a trade carried on by the spouse receiving it. In each such case the actual consideration is taken into account and the rules for computing trading income generally apply.

Subsequent disposal

(4) Where the no gain/no loss treatment provided in subsection (2) applies in relation to the disposal of an asset and the spouse who acquired the asset subsequently disposes of it (the subsequent disposal not being a disposal to which subsection (2) applies), he/she is treated as if he/she had acquired it at the time and cost at which it was originally acquired by the other spouse.

Relevant Date: Finance Act 2021