Online capital gains tax (CGT) for property disposals
Alex Wavell | 17.04.2020
16.10.2019 Philip Whitcomb
As a child, I was always encouraged to collect – be it stamps, postcards or old books – and as an adult that passion for collecting antiques and works of art has continued. There is nothing like the thrill of hunting down that one rare piece at an auction or antiques fair to add to your collection. Today, my interests include English Delft (a particular type of English pottery dating from the late 17th and 18th Centuries) and rare typographical books on the West Country, as well as the simple pleasure of collecting, are there any tax advantages, and what options are there for my collections following my death?
The tax treatment of investing in antiques or works of art is different from that of more conventional investments, such as stocks and shares. If you sell chattels (moveable items like paintings, antiques or jewellery) the first £6,000 of any sale proceeds are tax-free, and if you own the items jointly with your spouse that sum increases to £12,000. Where the proceeds fall between £6,000 and £15,000, marginal relief limits your maximum taxable gain to five-thirds of the excess over £6,000. Only when your antique or work of art sells for more than £15,000 do the normal capital gains tax rules apply. For large gains you have your normal annual exemption of £12,000, unless it has been exhausted on the sale of something else in the same tax year.
For chattels deemed “wasting assets” there is no capital gains tax to pay, regardless of what they sell for. These are mechanical devices HMRC deems to have a lifespan of 50 years or less, and they include collectors’ cars, antique clocks and guns. So, if you’re fortunate enough to own a brace of Purdey shotguns there would be no need to worry about CGT if you decide to sell them.
To prevent collectors exploiting the £6,000 limit by selling items individually when they are part of a set, there are special rules around sets of chattels. These are chattels which are similar, and which taken together are more valuable than the sum of their parts, a good example being dining-room chairs. Individually they may be worth £1,000 each but a set of eight could be worth £10,000, in which case the cumulative value is used to calculate the CGT.
For very valuable pre-eminent works of art or antiques it is worth taking specialist advice, particularly on death, as otherwise they are added to the rest of the estate and will contribute to a higher inheritance-tax bill. This includes the Acceptance in Lieu scheme, whereby the beneficiaries of an estate agree to donate a work of art to a museum rather than pay inheritance tax, or claim conditional exemption on the chattels provided that they are properly preserved, remain in the UK and are accessible to the public for a limited number of days. There are also other inheritance-tax planning opportunities, including gift and leaseback, which allow the item to be continued to be enjoyed by you but outside your estate for inheritance tax.
Being the custodian of a collection or work of art brings great pleasure, but it is worth considering the tax and legal implications of disposal and succession planning.