Tax Implications on Family Breakdown **2nd Edition **


In this blog, co-authors Sofia Thomas (specialist divorce tax adviser) and James Pirrie (FLiP Director and family law expert) explain what the second edition of Tax Implications on Family Breakdown covers.

First we hear from Sofia:

There’s no greater motivation for writing a second edition than the law changes so significantly that the first edition becomes wildly out of date! This new edition of Tax Implications on Family Breakdown covers the new changes to tax on divorcing couples with completely updated chapters on the matrimonial home, position on transferring assets as well updates to all chapters for other changes in the last few years. The tax landscape has changed post covid. HMRC seem to have an increased focus on recovering underpaid or unpaid taxes ( digital platforms such as AirBnB have been sharing data with HMRC about hosts income ) meaning that many individuals are finding themselves subject to a tax enquiry.

Frustratingly – even though the data to hand is increasing, HMRCs speed is not.  Just last month they wrote to UK individuals named in the Panama Papers – almost two years after the information was leaked.  Needless to say tax issues for the wealthy are not going away and as long as it is a feature of their life it will be a feature or at least need to be considered in their divorce.

It’s true that the need for a tax report when the parties main asset is their family home is now largely unnecessary given the changes in the law.  However, the tax position on divorce is one that should be taken seriously in complex or big money cases as it can significantly alter the financial position. The new laws on capital gains tax mean that there will rarely be an immediate capital gains tax charge on transfer but now that latent gain should be captured so that the net value of the assets is correctly recorded.

Other issues such as tax debts, ongoing HMRC enquiries and investments in tax schemes are also covered in the book as these are increasingly becoming a thorn in complex and big money cases.

The flow charts and checklists which were (I hope) useful in the last edition have all been updated to reflect the new tax rates, laws and deadlines.

Now hear from James Pirrie:

My part of the book, appointing the expert, needed an overhaul too … I think that the reason it is moving so fast is that there has been a judicial habit of leaking in change from the Civil Procedure Rules which operates as an accelerator.  For example, we have Nicholas Allen KC, who also sits as a High Court Judge borrowing from the CPR in the way that he suggests the FPR should be interpreted when it comes to raising questions in his article for the Financial Remedies Journal.

In May 2020, ideas of   1) starting early and   2) the imperative of meticulous observance of the rules felt like news.  Roll forward three years and this seems more common practice.  Now we need to wrestle with an increasingly tight regime for appointment and co-working.  The ways in which we keep in touch between cases falls under scrutiny because of the direction given us by Mostyn J in Zuber Bux v GMC [2021] EWHC 762 (Admin)  Muyepa v MoD [2022] EWHC 2648, again a CPR case, has seen ideas percolating that on the one hand we must ensure proper separation from the expert to promote and protect their but on the other an emerging duty on the solicitor to keep them on track.  We need to be conscious of their duties to the court and we have a responsibility to ensure that they fulfil that but also that they do not stray beyond their appointed domain.  Tightropes all round!

Mr Justice Mostyn has been surely the foremost judicial thinkers of our generation.  The fact that he has generously read the book and provided a foreword has been an incredible boost.  Just to think that we might be on the right track so far as he is concerned would be a significant endorsement.  What he has shared has gone significantly beyond that.  He has written as follows in the foreword:

This is a supremely fine piece of writing, unmatched in, or by, any other publication, to my knowledge…

In my opinion, a practitioner holding him or herself out as an expert in the field of matrimonial finance has a professional duty to have a sufficiently clear knowledge of the law of tax not only to be able to identify such issues but also to work out of the quantum  of the potential liability that such issues give rise to. The book imparts such knowledge effortlessly and painlessly, particularly by its use of uncomplicated examples.

As before, I strongly recommend that this book is prominently positioned on the bookshelf of any such adviser.

To buy Tax Implications on Family Breakdown (edition 2), make your order here. We would welcome any feedback once you have read this book.

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James Pirrie is a director at Family Law in Partnership. He specialises in complex financial issues and non-adversarial and cost-effective approaches to divorce and separation including mediation, arbitration and collaborative law. James has undertaken the financial planners’ training (up to FPC and G10) and has written for and delivered lectures to the legal and accountancy professions on a range of financial/ matrimonial issues.

Sofia is a Fellow of the Chartered Institute of Taxation. She is an award-winning tax expert and a lecturer in tax. Sofia is regularly instructed as an expert for contentious tax disputes and has extensive experience in international tax matters.  She is a Partner at Juno Sports Tax where she continues to win instruction on matrimonial & separation tax matters as well as providing tax advisory work throughout the Sports Industry.

Sofia is an expert contributor for the BBC, a representative of HMRC’s Wealthy External Forum and Cryptoassets working group. Sofia is also a Committee Member of the Tax Technical Steering Group which advises the government on upcoming legislation.