Capital Gains Tax on Chattels Sold
We recommend checking the capital gains tax on chattels, and any commissions applying, before you agree to sell personal possessions. Avery Associates can provide you with a valuation certificate, whereafter what you do next is over to you.
United Kingdom law broadly defines chattels as personal possessions, although there may be exceptions. The information in this post is provided in good faith. Please follow this link if you are in any doubt, to clear your mind on this very important matter.
Wasting and Non-Wasting Chattels and Capital Gains Tax
Chattels are tangible movable property, in broad terms. Therefore, they include, art, antiques, jewellery, fine wine, racehorses and other collectibles. These possessions fall into two groups – wasting and non-wasting – depending on the criteria that we expand on below.
Wasting Chattels in Terms of UK Law
A wasting chattel has a life of less that 50 years, in other words it theoretically wastes away. His Majesty’s Revenue Collection service (HMRC) exempts such chattels from capital gains tax when they change hands. Here are a few examples of capital gains tax on chattels under these circumstances.
Wasting Chattels in Terms of UK Law
Antique Clock Collection BY Avery Associates
All machinery is a wasting chattel in principle, even if it is robust. Hence the term includes clocks and watches, trains, boats and yachts viewed as machinery. However, machinery used in trade or business is not always exempt from capital gains tax. This is because the tax would still apply if capital allowances have been claimed (or could have been claimed on the equipment).
Therefore it follows that business machinery could incur two types of tax, if it were sold at a gain, and not at a loss:
- The first could be a balancing charge to recover earlier capital allowances.
- The second could be a capital gains tax on the profit from the sale itself.
Non-Wasting Chattels in Terms of UK Law
A non-wasting chattel is tangible movable property with an expected life of more than 50 years. Examples of non-wasting chattels include fine art, antiques and jewellery. The rules for capital gains tax depend on the net proceeds of the sale.
WHERE GAINS ON NON-WASTING CHATTELS WERE LESS THAN £6,000
The current tax rules at the time of writing, exempt non-wasting chattels from capital gains tax provided the proceeds of the sale are less than £6,000. Here are several examples:
- The chattel cost less than £6,000, and the proceeds of the sale were less than £6,000. The sale is capital gains tax exempt.
- The chattel cost more than £6,000, but the proceeds of the sale were less than £6,000. The sale is capital gains tax exempt.
- The chattel cost more than £6,000, but sold for more than £6,000. The allowable loss is the difference between the two. The sale may incur capital gains tax depending on the calculation.
Is Capital Gains Tax Due BY Avery Associates
WHERE GAINS ON NON-WASTING CHATTELS WERE MORE THAN £6,000
- The chattel cost more than £6,000, but the proceeds of the sale were less than £6,000. The allowable loss will not exceed £6,000.
- The chattel cost more than £6,000, and the proceeds of the sale were more than £6,000. The proceeds above £6,000 incur capital gains tax.
- The chattel cost less than £6,000, and the proceeds of the sale were less than £6,000. The capital gains tax on chattels sold is limited to 2/3 of the proceeds.
Capital Gains Tax on Chattels Sold in Sets
Collectible chattels sold in sets usually attract better prices than if sold as individual items. However, the rules of calculating gains or losses for capital gains tax purposes may not apply.
Georgian Decanter Set BY Avery Associates
Definition of a Set According to the UK Tax System
A set comprises a number of chattels that (a) are similar and complementary to each other, and (b) are worth more together than separately. These items may, for example be:
- A set of 32 chess pieces with the original chess board.
- Books on the same subject written by the same author.
- Matching ornaments such as statuettes or vases.
What Happens When a Taxpayer Sells a Set?
If we sell a set in a single batch, then the maximum capital gains exemption we may claim is £6,000. However, if we break the set up, then the rules become more complex.
Let’s imagine the 32-piece, antique chess set was worth £32,000 as a single item, but we purchased it for £20,000 a few years ago. The first £6,000 would be tax-free if we sold it, but we would have to pay capital gains tax on the balance.
However, if we sold the individual pieces separately for say £1,000 each, then the £6,000 tax exemption would apply to each transaction individually. In practice, we might well net a smaller sum in total though. The purchasers should also be independent of each other to remain within tax law.
Know What Your Chattels are Worth
Know what your chattels are worth before you commit to a sale anywhere in Greater London. Ask Avery Associates for advice, because we have been assessing collectible chattels for decades. You’ll never know for sure until you consult an expert. Now could be the right time to do so.
More Information
