Trust Residence Relief

5th September 2016

Matrimonial Trusts: Mesher orders and CGT residence relief.
When a marriage breaks down and there are children to consider, the Courts will often provide for a ‘Mesher Order’ – an order of the Court that the former matrimonial home is held on trust to provide a home for the children, typically until the youngest child attains age 18. One party to the marriage will inevitably have left the home and his/her share in the property cannot be realised until the Mesher order expires. In the interim, he/she will have acquired a new home as his/her main residence. So what of the main residence exemption for capital gains tax purposes? This will obviously attach to the new home.

Fortunately, there is a specific relief at hand – trustees can claim main residence relief from CGT when a trust beneficiary occupies trust property. But the relief must be claimed by trustees and the ending of the trust is a disposal for CGT purposes, whether or not the property is sold. Timely action is therefore needed.

We are able to offer help and advice on all aspects of tax affecting separation and divorce.

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