A chattel is a tangible asset that you own, that you can physically touch and move around. This means it forms part of your estate, and is potentially liable for inheritance tax when you die. But some chattels are exempt, which is why it is essential to understand how chattels and gains tax work in practice.
A Few Quick Definitions Before We Start
Assets are things that we can own and sell, and therefore form part of our estate. The following definitions help us to determine whether an asset is a chattel or property. This working distinction becomes very important when assessing our chattels for gains tax.
- TANGIBLE means we can touch a chattel, as for example a piano keyboard or a paintbrush.
- MOVEABLE confirms we can move the chattel without damaging it, or its surroundings.
- PROPERTY is a piece of land, and any embellishments on it including fixed improvements.
This working distinction becomes very important when assessing our chattels for gains tax planning. With that behind us, we can get down to a few tips for managing an estate for gains tax purposes.
A Fine Grand Father Clock (Image © Avery Associates)
The Chattels We Leave Behind And Tax
After we move on from life’s journey, wherever that may lead, we cannot return to put our affairs in order. This may include fine-tuning our estate, so our heirs inherit the maximum value that’s legally possible.
And why not, once we have a firm handle on how chattels and gains tax work together, and affect the worth of our estate once deceased. Please note that what follows is not legal advice, because we may only provide information in good faith. Speak to your solicitor if you are unsure what to do next.
Putting Chattels and Gains Tax to Work
To recap, chattels are tangible (touchable not virtual) things that we can move (easily relocate). It follows that they are physical objects in the real world, as opposed to investments where our rights represent value, not actual things. However, implementing this principle is not always that simple in practice:
- For example, a rare and desirable Bentley vintage car is a moveable chattel with objective value.
- Whereas, the value of apersonalised number plate on the Bentley is in the purchaser’s mind.
There is no unequivocal definition in UK tax legislation either, which might otherwise draw a line in the sand on the above matter. We come to a similar conclusion when we look for a firm statement on the question of immovable versus movable assets too.
- A piece of land attaches firmly to the planet, even if a storm washes away the top soil.
- So a building on that land with a concrete foundation, is part of that piece of land too.
- However, it is always wise to check the title deed, because there may be restrictions on use.
Fine Line Between Fixed and Movable © Avery Associates
Case law agrees a caravan is not part of the property on which it stands. But what about a temporary building on a construction site? If it rests on the ground, then it is movable. However, if it bolts onto concrete foundations, then a wise purchaser might double-check what the ACCA says, and perhaps insist on the building being noted in the agreement of sale.
However, there’s no doubt how chattels and gains tax themselves work, when it comes to precious items like fine art, antiques, jewellery, fine wine, and racehorses. These are all excellent examples of tangible moveable property, and hence need to be valued correctly.
Dependable RICS and Chattel Valuations
Avery Associates provides a bespoke, confidential service for valuing possessions for estate planning, and deceased probate purposes. Our deliverables include:
- RICS assessments of fixed property, done in accordance with Royal Institute of Chartered Surveyors standards.
- Independent chattel evaluations by experts with in depth knowledge of collectible items, and estate valuation.
Precious Memories From Time Past © Avery Associates
Rounding Out with Wasting Chattels
A wasting chattel is a transient item, with a useful life not exceeding fifty years from date of acquisition. However, the purpose for which the owner obtained it also has a bearing. Hence, if they subsequently sell e.g. a collection of fine wine, or a stud racehorse, then they should not be liable for capital gains tax. Much the same applies to machinery too.
However, if the item in question is a stamp or a coin collection, or a valuable work of art, then these will not be wasting chattels because they do not have a ‘use before date’. However, this may not apply if their true value is less that £6,000 and this can be independently motivated.
We Hope You Found This Information Helpful
Please remember Avery Associates if you need assistance with valuing fixed, or movable possessions for estate planning, or deceased probate. We provide a discreet service that respects client confidentiality. Please reach out to us if it appears we may be able to assist.
