Family Law Blog

An error in the Form E

16 December 2015, by Taylor King Family Law Solicitors

A fault in the Form E, the form used to collate parties’ financial information, has been spotted earlier this month by a family law specialist in Ascot, Berkshire. The error was in the calculation of assets on the summary page and has the software has been miscalculating assets since April 2014. The totals on that page failed to deduct any liabilities from the total therefore potentially overinflating the value of a spouse’s assets.
Approximately 20,000 forms were downloaded in the 20 month period the software was producing inaccurate calculations; however, not all of them will have been used to work out the division of assets.
Not all divorcing couples use the automatic calculator on the form, preferring instead to print out the form and fill it in by hand. At Taylor King, we use software that generates the form rather than downloading the one available of the Ministry of Justice website.
Judgments may have been handed down by the family courts founded on erroneous information.

An HMCTS spokesperson said: “We are urgently investigating this issue. Officials are taking steps to identify rapidly cases where this regrettable error may have had an impact, and we will be writing to anyone affected as soon as possible. Anyone concerned about their own court proceedings should contactformE@hmcts.gsi.gov.uk.”

Guide to sorting your finances on divorce

05 November 2015, by Taylor King Family Law Solicitors

The Ministry of Justice has published a guide, entitled Sorting out your finances when you get divorce.
It is aimed not only at the couple divorcing but also their family and friends. It is hoped the guide will assist couples understand the approach taken by the Family Courts, resolve their finances and reach agreement as quickly as possible.

It will be especially useful to litigants in persons who cannot afford legal representation.

The guide can be found here: http://www.advicenow.org.uk/guides/sorting-out-your-finances-when-you-get-divorced.

Sharland v Gohil

06 October 2015, by Taylor King Family Law Solicitors

In the case of Sharland, Mrs Sharland’s appeal centred on the impact of fraudulent non-disclosure. The valuation of Mr Sharland’s shareholding in his software business and its distribution between the parties was the main area of dispute. After a valuation on the basis that the company was not going to be floated on the stock market Mrs Sharland was to receive 30% of the net sale proceeds, whenever it was sold, together with other assets.
After the consent order was drawn up Mrs Sharland became aware, through the press, that Mr Sharland’s company was being prepared for an initial public offering and a substantially higher figure that it had been valued within the financial remedy proceedings.

The Court of Appeal upheld the judge’s refusal to set aside the consent order as he would not have made a substantially different order. The Supreme Court have now allowed the appeal and returned the case to the High Court.

In the case of Gohil, the consent order was agreed despite Mrs Gohil’s belief that there had not been full disclosure. She applied to set aside the order on the basis that Mr Gohil had failed to disclose all his assets. The court found that there had been material non-disclosure by Mr Gohil and that if there had been full disclosure a different order would have been made.

There is a now, therefore, a much stronger emphasis on the requirement to provide full and drank disclosure throughout the proceedings.

The two judgments addressed how a case should be reopened if material non-disclosure is identified:

1. A fresh action to set aside the order;

2. An appeal against the order; or

3. An application to a first instance judge in the matrimonial proceedings.

Permission is required for an appeal but not the other two and an appeal may not be the most appropriate venue for hearing new evidence and resolving factual issues that may often arise.

A Family Procedure Rules committee working party is currently considering whether the Family Procedure Rules or a Practice Direction should specify criteria for choosing between the different applications.

Developments to the family courts

18 September 2015, by Taylor King Family Law Solicitors

The Law Society’s Family Section has issued an update to the changes to the Family Courts. This update includes:
1. They expect all the divorce work from London, which was being transferred on a phased basis, to be processed from Bury St Edmunds by October 2015. It is expected that the Bury St Edmunds divorce centre will issue approximately 40,000 petitions a year.

2. It is expected that changes to the divorce petition will be introduced by the end of September 2015.

3. Guidance is being developed on what would constitute ‘urgent’ work, examples would include applications to set aside transactions or jurisdictional disputes. For now, the local courts can still issue urgent work.

4. The Financial Remedies Unit has been established as a specialist unit within the Central Family Court to efficiently handle complex financial cases. In order to be transferred to the FRU the case must be sufficiently complex and a Certificate of Financial Complexity completed. The certificate requires details of the total value of the assets with tick boxes flagging up any other potential areas of complexity including:

a. Complex asset or income structures

b. Non-disclosure (this may become more relevant subject to the outcome of the appeals to the Supreme Court of Sharland and Gohil)

c. Assets held offshore or through offshore settlements, family businesses or unquoted corporate entities, or where there is an issue of the value of such entities

d. Expert accountancy evidence is required

e. There are issues over contributions or substantial arguments over matrimonial /non-matrimonial assets

f. Disputed allegations of obvious and gross conduct

g. Illiquidity of assets

h. Complex or novel legal arguments

If it appears that the complexity criterion may not be met the application will be sent to a judge of the FRU who may decide to send the application to Bury St Edmunds for issuing.

In July 2015 Mostyn J revised the asset thresholds for financial remedy hearings before High Court Judges. In order to be transferred to the High Court the total assets should exceed £15million, or the overall net income exceed £1million. If the assets are between £7.5million and £11million there should be substantial allegations or issues relating to non-disclosure, offshore assets, reliance on a pre/post nuptial agreement or significant third party interests. The only applications that will be transferred to the High Court where the assets are less than £7.5million are those involving a novel and important point of law.

Pension changes – NICs

06 August 2015, by Taylor King Family Law Solicitors

The New State Pension, replacing the old system, will affect those who reach state pension age on or after 6th April 2016.
Previously, if you had not contributed National Insurance payments for the requisite 30 years to obtain the full state pension, but your spouse/civil partner had, you could claim a full state pension based on their contributions.

However, if you reach state pension age on or after 6th April 2016 your state pension will normally be based on your own National Insurance contributions only.

Under the new state pension, your state pension may be worked out in a different way if you chose to pay National Insurance contributions at a reduced rate under the married women’s reduced rate election before 1977. If this is the case then you will get a state pension that is about the same as the full rate basic state pension of £115.95 per week and any additional state pension you built up before 6th April 2016. Under these rules you do not need to have the minimum of 10 qualifying years of National Insurance contributions to get a state pension.

Tax implications on divorce

22 January 2015, by Taylor King Family Law Solicitors

When a couple are married and have not separated, if they wish to transfer assets between each other they can do so without any capital gains tax implications. However, this tax benefit disappears at the end of the tax year following permanent separation. If the divorce is finalised in the same tax year as separation the tax benefit will end on the date of the divorce rather than the end of the tax year.

From a tax point of view the date of separation should ideally be 6th April thereby giving the divorcing couple an entire year to agree the transfer of assets between each other. However, the reality for most people is that by the time they start thinking about tax planning on divorce the capital gains tax exemption will be gone.

The Family Home

The family home is one exception to the above. It will qualify as being capital gains tax free on transfer if it has been the couple’s main residence throughout the entire period of ownership under the principal private residence relief. Principal private residence relief can be claimed if all of the following conditions are met:

  • One spouse or civil partner stops living in the family home because they have separated;
  • The partner that moved out has not formally elected with HMRC for another house to be their main home;
  • The partner that moved out later gives their interest in the family home to resident spouse/civil partner;
  • The other partner keeps living in the family home and their main house; and
  • The transfer is made as part of the divorce settlement.

If the parties agree that the former matrimonial home is to be sold after separation then the non resident spouse is only entitled to claim the capital gains tax relief for a period of three years from the date he/she moved out of the property. Therefore, departing spouses should ensure that the former matrimonial home is sold within three years of their leaving the property.

If, as part of a divorce settlement, the court orders that the former matrimonial home is not to be sold until the youngest child ceases full time education then the non resident spouse would still be entitled to the principal private residence relief when the property is sold. However, he/she would not be able to claim that relief on any other property in which they resided prior to the sale of the former matrimonial home.

Family Businesses

Businesses can also be transferred without a capital gains tax charge, i.e. sole trader businesses, interests in partnerships that are trading or shares in unquoted trading companies. However, the business must not be a property rental/investment business. There are detailed requirements and procedure that must be met so if this applies to you, please consult a tax advisor.

Income

Special income tax rules also apply to married couples in the case of income from jointly held property. Provided that at least one spouse is entitled to the income, the spouses are taxed under this rule as if they were sharing the income on a 50/50 basis. This rule ceases to apply on the date the married couple separate.

Inheritance Tax

For inheritance tax purposes, transfers/gifts between spouses are exempt transfers up until the marriage or civil partnership has been dissolved. Transfers made on divorce, or for the maintenance of the family are also exempt from inheritance tax.

Pay child maintenance or risk your credit rating

30 November 2014, by Taylor King Family Law Solicitors

It is proposed, subject to Parliamentary approval, that from March 2015 the Child Maintenance Service and Child Support Agency will begin sharing certain information about the payment records of their clients with credit reference agencies. Separated parents who fail to contribute financially to the upbringing of their children could therefore face damaging their credit rating.

Principally, information will be shared about an individual when a liability order is made against them – a last resort after all other methods of encouraging payments have been exhausted. Between April 2013 and March 2014, 12,410 liability orders were granted.

It is expected that the introduction of this new measure will have a deterrent effect on parents who may otherwise choose to evade maintenance payments.

However, it can also benefit a parent who has a good record of making maintenance payments who can request that information about them be shared with credit reference agencies if they believe it will help improve their credit rating.

Post divorce relationships: a fly in the ointment

17 October 2014, by Taylor King Family Law Solicitors

Last month one of the leading family law judges Mr Justice Mostyn in the case of AB v CD stated that when it came to assessing the needs of the parties in financial proceedings within the divorce a new relationship was “a significant fly in the ointment”. The problem arises when one party starts a relationship with  a new partner before finalising financial arrangements following divorce.

In this case the wife had made a financial claim following her divorce. Before the financial proceedings had concluded she had started a relationship with another man, a fact that she had not disclosed. The wife alleged that she did not intend to cohabit with her boyfriend but the Judge found that this was a strong relationship notwithstanding that it had only been going for nine months. The Judge had to consider whether the lump sum whether a lump sum of approximately £250,000 was sufficient to meet the needs of the wife. The financial needs of someone who is cohabiting are likely to be less than those of somebody who is living on their own. For example, a new partner would share the costs of providing a home and the housing costs.

The Judge did take into account the wife’s new relationship and accepted that the lump sum was appropriate for her needs although it might not have been sufficient if she had been single to allow her to relocate to be near friends and family.

The court, in deciding the needs of the parties, has  taken into account whether one or the other is cohabiting. What is unusual in this case is the length of time the wife and her boyfriend had been in their relationship and the expressed intention of the wife that she did not intend to cohabit.

In our experience we have found that district judges often disregard long term relationships in dividing the assets on divorce where evidence of cohabitation is difficult to obtain.

Financial obligations of unmarried parents

06 August 2014, by Taylor King Family Law Solicitors

Unmarried parents and married parents are treated differently when they separate. Although the number of children born to unmarried couples has more than doubled since the 1990s there has been no legislation to put unmarried couples on the same footing as married couples.

A poll carried out by One Plus One last year found that 47% of the population between the age of 18 and 34 wrongly assumed that unmarried couples had the same legal rights as married couples. 58% of all age groups believed that common law marriage existed.

Unfortunately although the parent with whom the children live can apply to the Child Maintenance Service (CMS) for child support it is not possible for them to seek financial support for themselves from their ex partner. Married couples in divorce proceedings are able to apply for spousal maintenance.

One option for an unmarried parent  is to make a claim under Schedule 1 of the Children Act 1989 to claim additional financial support for the benefit of the children. This does not enable the parent with the children to obtain maintenance for themselves but the court can order that funds are made available to pay for a nanny, school fees and expenditure specifically referable to raising the children. The court can even order the non resident parent to provide a home for the children. However, that property will revert back to the non resident parent once it is no longer required as  a home for the children. The resident parent acquires no proprietary interest in that property.

Where the non resident parent has a gross income of more than £156,000 then it is possible to apply for top up maintenance over and above the maximum amount paid under the CMS provisions. This will only apply to a limited number of unmarried couples.

Changes to child maintenance

02 June 2014, by Taylor King Family Law Solicitors

From the 11th August 2014 the Child Maintenance Service (formerly the CSA) will start charging fees for arranging the payment of child maintenance.

There will be a one off initial application fee of £20 to use the Child Maintenance Service. If it is necessary for them to take enforcement action against the non resident parent then the paying parent will have to pay an additional 20% on top of the usual child maintenance amount and the parent receiving the money has that amount reduced by 4%.

If the parents make payments directly between them there will be no further charges.

The old CSA system was extremely costly to the tax payer and, the government says, had fundamental problems. The new system is heavily subsidized by the tax payer but will encourage more people to certainly arrange payments themselves if not agree the child maintenance entirely themselves.

At Taylor King we have a specialist team of family law solicitors who can advise on child maintenance and formalising agreements on child maintenance. This can be dealt with as a free standing issue or as part of a separation or divorce.