Capital Gains Tax on Disposal of Chattels
The legal definition of chattels has recently been revised to encompass tangible movable property in general, other than:
Money
Property used solely or mainly for business purposes, where capital allowances have been, or could have been, claimed
Property held solely as an investment
It would therefore include:
Items of household furniturePaintings, antiques, items of crockery and china, plate and silverware
Lorries and motor cycles
Items of plant and machinery not permanently fixed to a building
Capital Gains Tax (CGT) Exemptions
Wasting assets (chattels with a predictable life of 50 years or less), unless used in a business
Private motor cars
Coins which are sterling currency
Deposits or withdrawals from foreign currency bank accounts
Disposal of single chattels
There is no taxable gain if the proceeds do not exceed £6,000 (joint owners each have a £6,000 limit). Where the proceeds exceed £6,000 but are not more than £15,000, use the steps shown below:
EXAMPLE
Antique table - proceeds of sale £9,250
Original cost (£2,000)
Incidental costs of sale (£350)
Actual gain £6,900
Now calculate the maximum chargeable gain
Excess proceeds over £6,000 (£9,250 - £6,000) £3,250
Multiply this by 5/3 £5,417
This is the maximum chargeable gain. Compare this with the actual gain, and use the lower figure, which is £5,417.
If the proceeds are more than £15,000 calculate the chargeable gain in the normal way.
Gifts of Chattels
In accordance with normal principles, a gift is treated as a disposal at open market value at the date of the gift, and so it will be advisable to obtain relevant valuations.
Sets of Chattels
A set is a number of chattels that are:
Similar and complementary to each other, and
Worth more together than separately
Disposal of assets in a set are treated as separate disposals unless they are sold to the same person or persons who are connected. In such a case the £6,000 limit applies to all of the set collectively and not to each member individually.
Annual Exemption
Even if the disposal proceeds of chattels exceeds the £6,000 exemption level, there may not be any tax to pay because the gain, together with all other gains, may be covered wholly or partially by the CGT annual exemption (£11,100 for 2016-17).
Income Tax
In the normal way, investment in chattels is not usually subject to income tax. However, a sequence of gains on disposal may lead to the conclusion that they are being held for trading purposes rather than investment.
Value Added Tax
Collectors' coins may be liable to VAT at the standard rate. However, coins classified as 'investment gold' are exempt from VAT and do not qualify for inclusion in the VAT second-hand schemes.