Consent OrdersTaxes on divorce

Property adjustment order and stamp duty

Since the recent budget it is essential to know more about the term property adjustment order and stamp duty when getting a divorce.

A property adjustment order is an order made on divorce, judicial separation  or civil partnership dissolution in connection with property.

It can be an order to transfer property from one person in the couple to the other or (more rarely) to the children.

Alternatively it can be an order to “settle” property or adjust an existing settlement.

A settled property is one where there is an agreement about the circumstances in which it can be sold, who is to receive any proceeds of a sale and who is to live in it and pay the bills and so on in the meantime.

These agreements don’t have to be in writing. However, it is strongly recommended that they are written down to avoid disputes in the future.  Written agreements of this type are known as “deeds” and have to be drawn up in a particular way.

So why property adjustment order and stamp duty? In the last budget the chancellor announced changes to the stamp duty rules for couples going through divorce that will help in situations where selling the family home is not an option or not desired but the departing spouse or civil partner needs to buy him/herself a new home.

Cost of getting a divorce is rising – but why?

As reported in the Independent, Aviva has publised research this week on the cost of divorce.

The headline findings reveal that divorce is taking around 3 months longer to conclude than in 2014 and the average legal cost has doubled from £1280 to £2679.

That may not be so surprising as the court service has increased its fee for starting a divorce from £410 to £550 and some inflation in the cost of advice is also to be expected as law firms’ overheads have risen in that time.

However, the real cost increase is in finding alternative housing. If you want to keep the cost of rehousing down you need to be aware of the impact of a property adjustment order and stamp duty.

Property adjustment order and stamp duty on divorce

During the period of this research additional stamp duty was introduced on second homes bought by married couples. This has meant that many separating couples have paid additional stamp duty on properties they have bought (even in their sole names) whilst still married but separating, if they still owned a share in the family home.

property adjustment order and stamp duty
separating couples have paid additional stamp duty on properties they have bought (even in their sole names) whilst still married but separating, if they still owned a share in the family home.

The higher and additional rates of stamp duty and when they apply are complicated. However, it all generally focuses on whether you are formally separated or divorced and, if you are,  whether you will end up owning one house each or retain one in joint names and buy another for the departing spouse/civil partner to live in.

The chancellor made amendments to the rules in his last budget which make life a little easier for those going through divorce straightaway.

Under the new rules, if one half of a couple needs to buy a new property after divorce/dissolution of civil partnership, it will not necessarily be treated as a second home provided that there is a court order (a property adjustment order) to regulate the ownership of the jointly owned family home moving forwards. In other words, get a property adjustment order and stamp duty may not apply.

Property adjustment order by consent (consent order)

Not all court orders require couples to be at war to obtain one.

Most divorcing couples reach agreement about their financial arrangements following separation and divorce. Some don’t need any help from lawyers to do so.

However, they will need help converting that agreement into a court order by consent (known as a consent order).

However you reach agreement, it is always a good idea to write it down in a clear way to avoid future disputes. It is absolutely essential to take professional advice before purchasing a new home to make sure that you understand the options open to you and the tax implications of each.

This is especially the case if one of you is going to stay in the family home for a while, perhaps until the children have grown up.

For more information on my consent order service generally please see my consent order factsheet. 

Divorce costs

Unless you qualify for partial or total exemption from paying court fees, the court costs associated with an amicable divorce are:

Petition issue fee: £550 (correct as at 11 January 2018)

Consent order fee: £50 (correct as at 11 January 2018)

If you need help preparing the divorce paperwork you will need to pay a solicitor to help you. The cost for this varies enormously and you will need to shop around to find the right service for you at a price you can afford.

My fees for preparation of a consent order start at £180 for a straightforward agreement.

Contact me using my fee enquiry form for more details.

 

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