Whilst many of us will never have an opportunity to sell or carry an Olympic torch, recent publicity about this issue has highlighted the possible tax implications if you sell an item of personal property for a profit.
A charge to capital gains tax (CGT) arises if you sell a chattel (an item of personal, moveable property) for more than £6,000. The following facts will need to be taken into account when deciding if gains, or losses, need to be declared:
- Chattels with a predictable useful life of 50 years or less are normally exempt from CGT.
- Chattels include items such as household furniture, paintings, antiques, items of crockery and china, plate and silverware, motor cars, lorries, motorcycles and items of plant and machinery not permanently fixed to a building.
- There is a special formula for calculating a capital gain where a chattel is sold for between £6,000 and £15,000. The taxable gain is calculated as the lower of the actual gain or 5/3rds of the excess over £6,000.
- Sometimes the sale of a chattel may be for less than the amount paid for it. In such circumstances a capital loss is made. In general taxpayers can deduct capital losses from capital gains made in the same or future years. As a general rule if the asset would have been liable to CGT had a gain taken place then the loss should be an allowable deduction.
- A loss cannot be claimed on the disposal of a private car or on wasting assets (e.g. wine).
- If the disposal proceeds are less than £6,000 any loss is restricted as £6,000. If the proceeds are £6,000 or more the amount of the loss that can be claimed is unrestricted.
So take care to consider the possible CGT consequences the next time you sell an item of personal property caught by these regulations.
If you require any further advice or assistance with any capital gains tax queries please do give us a call.
Sue Stephens, Personal Tax Consultant