CG65334 - Private residence relief: separation, divorce or dissolution of civil partnership: effect of court action
Source: gov.uk (2025-10-07)


If the court recognises an existing equitable interest, there is no disposal from the spouse or civil partner with the legal title to the spouse or civil partner with the equitable interest. The Court recognises that interest, it does not create it. The beneficial ownership is not altered.

If the Court orders a transfer of the home, to the spouse or to the civil partner or into trust, there is a disposal of an interest by the spouse or civil partner ordered to make the transfer. The Court has created an interest rather than recognising an existing interest. Moreover, the ability of that spouse or civil partner to sell any remaining interest may be restricted because he or she will be unable to offer immediate vacant possession to a purchaser.

For the date of the disposal of the interest see CG22420 (https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg22420).

If the Court orders provision of a specific amount of money for a spouse or a civil partner out of the proceeds of a future sale of the house, the Court has not created or recognised an interest in that house. The beneficial ownership is not altered. This is illustrated by the example shown below.

You may also see cases where the specific amount of money becomes payable as a result of a Court order under S31 Matrimonial Causes Act 1973, and the new Court order replaces in whole or in part an earlier order for periodic payments. The Court has not created or recognised an interest in that house. Neither of the making of the replacement order nor the payment of the specified amount give rise to a chargeable gain (see also HMRC interpretation RI 227 issued in April 2001)

Example

Mr D bought a house (which he solely owned) in January 2010 for £100,000 and occupied it with his wife until May 2015, when they separated. He bought a new house for himself whilst she remained in the matrimonial home. They divorced in May 2019.

In August 2019 the Court ordered that Mrs D should be given £53,000 out of the net proceeds of any future sale of the matrimonial home by Mr D. She moved out in February 2020 and the house was sold with vacant possession in May 2020 for £165,000, with costs of sale £6,000.

The gain accruing to Mr D is computed as follows:

Disposal proceeds of £165,000

Less the costs of sale of £6,000

Less the acquisition cost of £100,000

Equals a net gain of £59,000

Where:

Mr D’s Period of ownership for the period January 2010 to May 2020 amounts to 125 months;

of that, the period of ‘only or main residence’ is between January 2010 - May 2015, or 65 months;

and the final period allowed by s223(2) TCGA92 is 9 months;

Mr D’s Private residence relief is calculated as follows:

65 months plus 9 months gives a total period of 74 months

74 months is divided by the whole period of ownership of 125 months, equating to 0.592

0.592 is multiplied by the net gain of £59,000, equating to £34,928

£34,928 is deducted from the net gain of £59,000, giving a chargeable gain of £24,072

Annual exempt amounts may then be applied to the chargeable gain.

Mr D is not entitled to a deduction for the £53,000 paid to Mrs D, because this sum is not allowable expenditure deductible from the proceeds under s38in arriving at the taxable gain.

No chargeable gain accrues to Mrs D on the sale of the house or on receipt of the amount of £53,000 payable to her.

Court orders for future unascertainable consideration

Where the Court orders provision for a spouse or a civil partner to be paid a proportion of the proceeds of a future sale of the house without there being a continuing interest in it up to the time of sale, this is a right to future unascertainable consideration. A right to future unascertainable consideration constitutes an asset in its own right for capital gains purposes as illustrated by the decision in Marren (Inspector of Taxes) v Ingles [1980]. See CG65358 (https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65358) for information on when private residence relief applies to a gain which accrues in these circumstances.