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Separation and divorce:
Ancillary relief

Ancillary relief is the term given to any financial arrangement or settlement between the parties to the divorce. Either party, regardless of who initiated the divorce proceedings, can claim it.

Once one of the parties has claimed ancillary relief, each spouse must complete a statement detailing all of his or her property and assets (known as a "Form E").

The completion of Form E can be an onerous task and will often require the assistance of your accountant, particularly if you have your own business. The form must include details of all your income and assets (including details of any rights to assets held in a trust) and you must also provide copies of:

Property valuations

Mortgage statements

Insurance policy valuations

Bank statements

Business accounts

Pension valuations

Payslips and form P60s

Credit card statements.

Some of this information, particularly valuations, will be obtained specifically for the divorce proceedings. It is a good habit to keep financial documentation for a number of years (even if you are not intending to get divorced!). It can often be required, for example in insurance claims, to support mortgage applications or in support of your tax returns. Obtaining duplicate information can be expensive. Click here for more information on keeping your financial records in good order.

Throughout the process the parties are encouraged to reach agreement between themselves, which can then be confirmed by the Court. In the absence of agreement between the parties the Court can make the necessary order for the ancillary relief.

The final settlement will include one or more of the following:

A lump sum payment from one party to the other

A lump sum payment for any children

Periodic maintenance payments from one party to the other

Periodic maintenance payments for any children (provided the parties agree, if not it is dealt with separately by the Child Support Agency)

The transfer of property from one spouse to the other

The sale of property (for example investments or the family home)

A share in a pension fund.

The tax treatment of payments or transfers of assets can depend on the precise timing within the divorce process. It is worth taking advice as early in the process as possible to ensure the financial terms are settled in a tax efficient manner.

The provisions for ancillary relief allow for potential capital gains tax liabilities on assets but professional advice will usually be required to establish the likely liability.