Family Law Blog

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.

Non-disclosure in financial proceedings

13 May 2014, by Taylor King Family Law Solicitors

As family lawyers we constantly advise our clients that they have a duty to provide full and frank financial disclosure to the court. However there have been two recent cases that give rise for concerns where one party does not provide full disclosure and deliberately holds back information or misleads the court.

In the case of Sharland v Sharland Mrs Sharland wanted to refer the matter back to the court after she discovered that her husband had kept vital information from her and the court and had not been open and honest about his financial position. She sought to ask the court to consider the new information and to set aside the previously agreed order. However, the court would not set aside the order on the grounds that the agreement which was incorporated in the order would have substantially the same had there been full disclosure and the non disclosure was found not to be material. Mrs Sharland’s application to set aside the order was dismissed and she took the matter to the Court of Appeal. Although sympathetic the Court of Appeal were not inclined to intervene and the matter will now be dealt with by the Supreme Court in 2015 to find out whether or not the husband’s fraudulent non disclosure was material enough to set aside the final court order.

In the case of Gohil v Gohil there was a consent order in 2004. The wife, upon discovering that there had been incomplete disclosure, sought to set aside the order. When the matter first came before the court the judge was satisfied that the husband had failed to give full and frank disclosure of his financial circumstances and the order was set aside. The judge considered that the non disclosure was material and took into account fresh evidence. On appeal to the Court of Appeal it was decided that the judge did not have jurisdiction to set aside the original order.

There are very limited circumstances in which a final order, whether made by consent or following a contested final hearing, can be overturned. As long ago as 1985 it was stated that parties who apply to set aside orders on the grounds of failure to disclose relatively minor matters which would not have made any substantial difference to the order are likely to find their applications being dismissed and have an order for costs made against them.

The court, in the following circumstances, could overturn an order:

  1. Fraud, mistake or material non-disclosure – this will be the focus of the Sharland case in the Supreme Court. It is not enough to prove fraud, mistake or material non-disclosure. You have to prove that it materially affected the outcome of the case.
  2. New unforeseen and supervening events – this needs to be extreme and needs to occur shortly after the making of the order. One such example was the case of a wife who killed herself and her children five weeks after the making of an order. The loss of employment or the increase or decrease of the assets of the parties is not sufficient.

Pension Sharing Orders: A Study

20 March 2014, by Taylor King Family Law Solicitors

Taylor King frequently deal with cases involving pensions, including police and overseas pensions. Recently they acted on behalf of a husband who obtained a pension sharing order in respect of his wife’s pension. The first detailed study into pension sharing on divorce has recently been published – this article explores its findings.
Read more →

Maintenance and Pre-Nuptial Agreements

20 January 2014, by Taylor King Family Law Solicitors

Under the present law in England and Wales prenuptial agreements are not binding on divorce courts. Since the judgment in Radmacher v Granatino in 2010 the courts have started to take prenuptial agreements into account in deciding financial orders. The courts are increasingly upholding prenuptial agreements provided that they are fair. This article explores how they are being treated. Read more →