New rules on matrimonial property law: What does this mean for SMEs?

It is important for SME entrepreneurs to stay informed about legal and tax developments that may affect both their private assets and their business operations. From 2025, stricter rules and controls will apply to matrimonial property law.

Reason for the stricter rules

The immediate reason for the increased supervision is a ruling by the Supreme Court in 2024. In view of the death of one of the spouses, they amended their prenuptial agreement to entitle the surviving spouse to 90% of the community property. The surviving spouse thus inherited only 10% instead of 50%. The Supreme Court ruled that this unequal distribution did not violate the law. With the new rules, the government wants to combat tax avoidance through prenuptial agreements and settlement clauses, because these constructions are sometimes used in practice to avoid taxation. This leads to lost tax revenue.

What will change from 2025?

Even before 2025, it was possible to agree on an unequal distribution of the matrimonial property in the event of divorce, provided this was laid down in advance in the prenuptial agreement. What will change from 2025 onwards is that the Tax and Customs Administration will intensify its checks on arrangements whereby assets are transferred via prenuptial agreements or settlement clauses. If the Tax and Customs Administration considers that one of the partners is being favoured, this will be regarded as a gift and therefore subject to gift tax. The focus is therefore on tax supervision and not on the legal possibility itself. There may be other reasons for agreeing on unequal shares with regard to entitlement to the community property between spouses. Agreements on the distribution of assets accumulated during the marriage (settlement clauses) will also come under scrutiny.

The regulation applies not only to spouses, but also to registered partners and unmarried cohabitants who qualify as each other’s tax partners for the purposes of the Inheritance Tax Act 1956.

All existing prenuptial agreements and notarial cohabitation agreements entered into before 16 September 2025 will be honoured.

Calculation example: Unequal distribution and gift tax

Situation:

• An entrepreneur and his partner are getting divorced.

• The total joint assets amount to €600,000.

• According to the prenuptial agreement, it is agreed that the entrepreneur will receive €500,000 (including the business) and the partner €100,000.

• The Tax and Customs Administration considers this distribution to be unreasonable, because the partner receives €200,000 less than in the case of an equal distribution (€300,000).

Tax consequences from 2025 onwards:

• The difference of €200,000 is considered a gift from the partner to the entrepreneur.

• Gift tax is payable on this amount.

• Suppose the gift tax rate between partners is 10%.

Calculation:

• Taxable gift: €200,000

• Gift tax (10%): £20,000

Conclusion

In this case, the entrepreneur must pay £20,000 in gift tax on the portion he receives in excess of what would be customary under an equal distribution. This calculation example shows that, in the event of an unequal distribution, it is important to carefully consider the tax consequences in advance and seek advice in good time.