Capital Gains vs Income Tax when buying/selling PM

[Goldhooked]

At what point does any profit you make on selling PM become income rather than capital gains? At what level of buying and selling does it become a business?

I'm familiar with VAT and Corporation Tax but have no idea about this aspect.  I will ask my accountant at some point but he charges for his advice

[BackyardBullion]

So it is a topic which I have looked into because of my set up making and selling hand poured silver, and also buying coins specifically to sell.

Bottom line is if you are just a collector and you are selling off your collection one day then it is would fall into the capital gains tax bracket. 

If you are specifically buying something with the intention to sell it on - or like me taking a raw material, producing something and then selling it then you are acting as a business and it needs to be declared on your Tax form (assuming you already complete one). If you don't do a tax form each year already (I am a landlord and self employed so I have been doing these for the last 8 years!) Then you will need to register for self assessment and declare it on your form as "private income".

This is a really interesting article I on the topic and well worth a read for any "professional flippers" 

http://www.telegraph.co.uk/finance/personalfinance/household-bills/11632478/HMRC-targets-Etsy-eBay-and-Gumtree-sellers-but-when-is-your-hobby-taxable.html

[BackyardBullion]

This is the most useful part. 

[Goldhooked]

Flipping would be classed as trade then.  I wonder how they would view it if you bought a bulk deal for some specific pieces to keep in your collection but then sold off the ones you didn't need/want?

[Finbinfin]

Yeah if you Google "badges of trade" then there is a really useful paper on lexis nexis discussing this issue. If you are constantly flipping items this could be classed as trading but if you are just selling the odd coin or a collection you've built up this may fall under CGT (where you have a separate annual allowance of c£11k in gains before you pay any tax, plus UK legal tender is exempt from CGT).

[SilverTanner]

Point 5 was interesting - is getting coins slabbed to add value (may also make it worse ) classed as the item being modified? For me it is just protecting the coin

My sales are a result of changing my collecting interests and/or as a result of upgrading a coin so I have always treated this as a capital gain. Not being a flipper the only things I have sold quickly are other items from bulk lots where I only wanted one thing.

[Goldhooked]

Making an analogy with buying and selling shares - I have always considered that as a capital gain.  But you are obviously buying shares in the hopes of making a profit, they are hardly collectibles!  So that's an investment, why not the same for precious metals?

[boon]

Also with shares, i believe capital gains is exactly that- and it is net profit which is taxed. Therefore, if like me you are terrible at selecting shares, any loss in a taxable portfolio can go up against any gain! i'd assume that would work the same if you were a "bad flipper?" 

[Goldhooked]

3 minutes ago, boon said:

Also with shares, i believe capital gains is exactly that- and it is net profit which is taxed. Therefore, if like me you are terrible at selecting shares, any loss in a taxable portfolio can go up against any gain! i'd assume that would work the same if you were a "bad flipper?" 

Good point.  I have carried over losses from share deals in the past.

I'll have a chat with my accountant and see what they say about it all.

[Martlet]

8 hours ago, Goldhooked said:

Making an analogy with buying and selling shares - I have always considered that as a capital gain.  But you are obviously buying shares in the hopes of making a profit, they are hardly collectibles!  So that's an investment, why not the same for precious metals?

It is the same for PM.  Consider the overall activity, rather than a single trade. If you make a nominal profit on ebay sales each year of say £250 but buying another £500 worth of silver, you're investing (or collecting/hobby).  As precious metals (or shares) are considered investment assets the assumption would be its capital gains.