Volume 47, Number 9, September 2010
Taxing issues THIS “Comment” has taken many forms over the years—I’ve talked about new coins, old coins, the state of the hobby, coin fairs, banknotes, tokens—you name it, I’ve covered it. However, it is rare that I give out and out advice, preferring instead to offer my opinion—advice gets complicated! In last month’s COIN NEWS I decided that the recent budget had been so important in terms of tax changes that both an opinion on what that meant to coin collectors, and some advice for them, was necessary. Graeme Restorick of Chards had been kind enough to pen a letter regarding the position on VAT and Capital Gains Tax (CGT) for collectors and I decided to use that letter on this page to give our readers an idea of what was going on. Unfortunately whilst Graeme’s letter was very useful it did make a few omissions and, if read wrongly, could have misled one or two readers—as a couple of people pointed out to us shortly after the magazine came out. With this in mind we went back to Graeme, and asked the advice of a couple of other people “in the know”, and can, this month, clear up a few of the issues that were troubling our correspondents. Before we do that however, I would like to stress that we are NOT tax experts and nothing you read here (or indeed in most other places) should be taken as gospel—this is meant for guideline purposes only and anyone who thinks that there may be an issue is urged to talk to an accountant and/or the tax office! If you get it wrong please don’t blame COIN NEWS! The key issues omitted last month concerned the assertion that gold coins issued after 1800 were free of VAT. This, according to HM Customs notices 701/21 and 701/21a (do read these if you can, they are very useful), is not strictly the case as it only applies to a gold coin that is of a purity of not less than 900 thousandths (90% or .900) that is, or has been, legal tender in its country of origin, and is “of a description of coin that is normally sold at a price that does not exceed 180% of the open market value of the gold contained in the coin”. Now this will cover most gold coins in our hobby, but there are one or two exceptions and readers should be aware of them—they would include, for example, the 1813 British Military Guinea; some foreign gold coins issued in 18ct, 14ct, 12ct, 9ct gold (or any other sub 90% gold); pattern coins (because they are not legal tender) and “off-metal” gold proofs such as those in the 2002 gold 13-coin Golden Jubilee proof set. The penny from this set would still be legal tender, but gold pennies do not normally sell for under 180% of their intrinsic gold content value, so again this would not be covered. This status can of course change because of the secondary market. Another point that troubled some was mention of “investment gold bars”, for whilst they are VAT free, as was detailed, the definition of what makes an “investment gold bar” is quite strict—just any old bar won’t do I’m afraid and that wasn’t made clear. To qualify as “investment gold”, a gold bar must be “gold of purity not less than 995 thousandths and that is in the form of a bar, or a wafer, of a weight accepted by the bullion markets”. In other words “home made” bars of the type seen occasionally are not acceptable to the taxman. These issues are important of course (as is the assertion that certain items were subject to CGT at 28% when it should have read “up to 28%”) but the main concern voiced by those who got in touch was regarding the example of the sale of the Krugerrand—because whilst the maths was correct there was one important omission—this particular example would not have exceeded the £6,000 lower limit set by her Majesty’s Revenue and Customs for an item to attract Capital Gains Tax. Any coin, or indeed set of coins or collection sold for less than £6,000 would NOT attract CGT. Only when a single coin or “set” is sold for more than that does CGT kick in. Below that figure and a coin is considered a chattel and thus free of tax. The whole area becomes a little murky when we talk about selling a “set” of coins compared with a collection: a set which fetched over £6,000 would be liable for CGT (on the profit element as detailed last month) regardless of the individual price of the coins therein (think an 1887 Golden jubilee 11 coin set for example), whereas a “collection” that sold for over £6,000 would not. However, if you decide to sell a “set” over a period of time to one person (i.e. with each coin being sold for less than £6,000 but the whole “set” being worth more, you’ll still be liable for CGT as set out. Then again if you sell it “piecemeal” to different collectors with each coin being sold for less than £6,000 (but the total being more than £6,000) then there would be no liability . . . see, I told you it was complicated! And all this complication comes before we get into the realms of income tax—which is perhaps something to think about if you’re buying and selling coins on a regular basis! I hope I have made things clearer, but I suspect not, therefore I will urge you once again to get the advice of a professional if you are at all worried. Then again as we have seen, even professionals can make mistakes. So I guess sometimes all you can do is do your best. Thanks to Edward Baldwin and Seth Freeman of Baldwin’s, Graeme Restorick and Lawrence Chard of Chards and Garry Charman of Format of Birmingham for their help in trying to straighten out this complicated subject!
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