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A ‘Mesher’ order is a court order that postpones the sale of the marital home, the actual date of sale being dependent upon certain specified events.

If the property subject to the order is sold more than three years after the date of separation then the calculation is the proportion of gain made after the three years in relation to the total period of ownership or 31 March 1982, whichever is the latest date. The only situation where HMRC will allow more than three years’ absence is when the property is transferred to the spouse/or civil partner as part of a ‘Mesher’ order and a PPR election has not been made.

HMRC view a ‘Mesher’ order as creating a trust for CGT purposes and as such the settlor party is treated as having transferred the property into the trust at market value even though the party transferring the property retains an interest. The market value applies because the settlor and trust are deemed to be ‘connected’.

The property will be deemed ’relevant property’ for IHT purposes and as such liable to the ten-yearly and exit charges. This may present difficulties as the trust will not normally have liquid funds to meet the charges. These charges are currently at a maximum of 6%.

Example:
An alternative to a ‘Mesher’ order is for the non-occupying party to place a charge over the property for a fixed sum with interest on the basis that the property be transferred to the occupying party subject to that charge. CGT will not apply on sale as such a charge does not constitute an interest in the property.