The end of a relationship will often have important tax implications which might only be apparent to a trained professional. That was certainly so in the case of a woman who, following the collapse of her marriage, was saddled with a substantial Capital Gains Tax (CGT) bill on the sale of her ex-husband's home.

Prior to their divorce, the husband moved out of the former matrimonial home into another property which they jointly owned. After renovating the other property, the husband sold it at a substantial profit. As the property was not the wife's principal private residence, HM Revenue and Customs assessed her for £14,376 in CGT on the transaction.

Ruling on her challenge to that bill, the First-tier Tribunal (FTT) noted that, following their separation, the couple informally agreed that she would retain the former matrimonial home whilst he would have the other property. That arrangement was subsequently reflected in their divorce settlement. However, when the sale went through, she remained the other property's joint legal owner.

She had made a £100,000 commitment towards the property's purchase. Following their separation, however, she ceased contributing towards the mortgage and played no part in its subsequent renovation and sale. She never occupied it and received none of the sale proceeds.

In upholding her appeal, the FTT found that the informal separation agreement had the effect of transferring the entirety of her beneficial interest in the property to the husband. That reflected their common intention and mutual understanding. No CGT liability arose in that, following the agreement, she held her legal interest in the property on constructive trust for the husband, who became its sole beneficial owner.