The chattels of a deceased person may attract capital gains tax in the United Kingdom under certain circumstances. The current tax rate at the time of publishing is 24%. This can add up to a sizeable sum. It may be well worthwhile whittling away within the law for the sake of the heirs.
Two Definitions Before You Read On
The chattels of a deceased estate may take a variety of forms. If you are an executor of the movable assets, then you should understand the subtleties of the law in this regard:
- Chattels are tangible, moveable things that you can touch.
- Therefore they must be physical items the deceased owned.
- There is no straightforward statutory definition of ‘moveable’.
- Moveable may depend on the intentions of the deceased.
Chattels in a Deceased Estate Versus Land
Land is a fixed asset without any doubt. General UK confirms that buildings with foundations are part of the land on which they stand, because the owner cannot move them around.
However, if a building is not permanently attached, like a park home on blocks, then it remains a chattel. That’s because the owner could load it on a flat-bed trailer, and move it somewhere else.
The Value That Grows in Collectible Chattels
Antiques, classic cars, fine art, fine wine, jewellery, and racehorses are all examples of tangible moveable property. Although this is by no means the end of the list. Some chattels are transient and so their market value decreases over the years.
Other chattels are timeless, like the works of great artists, whose monetary value keeps growing to an extent we could never have imagined a few decades ago. But there are other, smaller things like jewellery, stamps, coins and watches accumulating value of which their owners may be unaware.
Avery Associates are bespoke assessors of collectible items in demand in London:
- Jeffrey Avery has a particular interest in twentieth-century design.
- Stuart Billington has unique knowledge of stamps and their history.
- Alan Darwell specialises in oils, watercolours, and antiquarian prints.
- Clifford Lansberry values fine art for tax, insurance, and probate purposes.
Business and administration manager Michael Payne works behind the scenes to ensure Avery Associates complies with all green, and other legislation.
How Much is This Worth (Image ©Avery Associates)
Two Categories of Chattels for Capital Gains Tax
UK legal convention describes movable assets with transient worth as ‘wasting chattels’, whose value shrinks with the passage of time. Non-wasting chattels, on the other hand, are those with an expected life of over 50 years, and are often collectible.
We set aside the rest of this article to exploring the capital gains tax implications of these two chattel categories. You should be in a more informed position to administer the chattels of a deceased estate, after reading what follows.
Administering Wasting Chattels of a Deceased Person
A wasting chattel is a movable possession we can touch, but whose useful life is LESS than fifty years. Its position on the usability scale depends on the purchase date, and the purpose for which required. A television set, for example is a wasting asset, while a diamond is not.
Capital gains tax does not apply to wasting chattels in the United Kingdom. But by the same token, we cannot offset losses on them. The same applies to a race horse according to ACCA Global. If it trips and falls, well that’s our bad luck with which we must live, even if we did not cause it.
All types of machinery are wasting chattels in terms of capital gains tax. If you are administering the chattels of a deceased estate, remember this applies to ALL machinery, including clocks, watches, trains, boats, and even yachts. However, if we use wasting chattels in business, then this exemption does not apply.
Capital Gains Tax On Non-Wasting Chattels
Non-wasting chattels are movable possessions we can touch, and whose useful life is MORE than fifty years. Most valuable, collectible items like fine art, antiques, jewellery etc. fall in this category.
If you are an executor in a deceased estate, and you are deciding to sell ONE of your collectible chattels, then the following applies for capital gains tax:
- Where the proceeds of the chattel sale are LESS than £6,000, then the gain is tax exempt.
- Any gain GREATER than £6,000 incurs capital gains tax at the prevailing UK capital gains tax rate.
- If the chattel cost LESS than £6,000 originally, the gain caps at 5/3 of the gross proceeds less £6,000.
Special Considerations When Disposing of Sets
Capital gains tax on a single chattel is calculated by subtracting cost from gain, and applying the prevailing rules. However, the same rule does not always apply to SETS of chattels when it comes to capital gains tax.
A set of chattels comprises a number of items that are similar, and complement each other. These are usually worth more as a collection than as a sum of individual items, for example a set of old books by the same author.
In this instance, if an ENTIRE set is sold to one or more people, then the £6,000 threshold applies to the entire set collectively, and not individually. Contact valuers Avery Associates directly for more advice on chattels and assessing their value for insurance or tax.
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