Capital gains tax on Queen's Beasts, a red herring?

[Guybrush]

Hi all,

 

Perhaps someone here can confirm my thinking (Or correct me if I am wrong)

 

CGT in the UK covers the first £10,000 of capital gains on your CGT free silver (And gold) bullion.  That's all well and good but its my understanding this only covers metal content and the price of it.  Therefore premiums are not CGT free.

 

Is my understanding correct.

 

If I have say one 2oz lion and silver goes up to 5000 per ounce I can sell 1 coin and not pay any CGT at 10000.  But if silver went to 2500 per ounce and the premium was 2500 I would have to pay tax on the 5000 premium?  (Obviously all numbers are made up to try and make the example easier to understand)

It seems that CGT is thrown around on UK coins but nobody mentions how premiums are not covered in this.  Now I dont have enough to ever care about CGT but it looks like its a CGT part that is always overlooked or is my understanding just wrong?

 

I also use queens beasts as an example because they are the ones that are likely to have higher premiums in the years to come as opposed to generic Britannia coins

[5huggy]

CGT covers ALL your investment returns and is currently set at £11,700/annum allowance -(The tax exempt part)

HOWEVER - fear not!

Capital Gains Tax is exempt on all British legal currency. This includes Gold Britannia coins , Silver Britannia coins and Gold Sovereigns. This means you can make an unlimited tax-free profit on investments of any size and value on ALL of these British legal currency bullion coins.

[5huggy]

This could of course change in the future! 😉😖

[Bullionaire]

Yes 5huggy is right. It wouldn't be great if you bought a nice painting and then sold it a few years later for a few thousand only to be told that the CGT exemption was only on the price of the canvas and oil

[Guybrush]

Thats what I thought but I am sure I read sometime ago that numismatic value (IE premiums are not covered)

Its this part of CGT that makes me wonder.

https://www.gov.uk/capital-gains-tax/market-value

I think HMRC will have market values at spot price on these coins.

[Guybrush]

I guess the real question is what, if anything does the spot price have to do with it when selling.

Or can I buy a 1oz gold brit now, then have a rich friend give me £11,700 for it tomorrow! (Well any amount really, its CGT free)

 

Thankfully its just me being curious as I wont ever need to worry about CGT anyway

[ilovesilverireallydo]

From what I understand market value is used in occasions when it’s a business or if you selling the item less than market value in case of selling to friends or family

[Guybrush]

Yeah everything I am finding on the HMRC site points to my thinking being wrong, regardless of what the spot price is.

[Martlet]

HMRC will calculate tax based on difference between price brought and sold, and they dont care about premium paid, only the record prices.   "Spot" comes into the matter if for some reason you have no evidence for the buy or sale price, in which case they take a market approximation.  Dont overthink tax, basics are simple unless you have an unusual situation, as remarked in the link where they list some exceptions where some "market value" will be applied. 

 

[Guybrush]

Yeah I see your point, I am only starting to think about it because of brexit, if this becomes a crash out I would move to gold (Like most I guess) and that only takes just over 10oz at spot price to start hitting your allowance for none UK coins.

[5huggy]

1 hour ago, Guybrush said:

Yeah I see your point, I am only starting to think about it because of brexit, if this becomes a crash out I would move to gold (Like most I guess) and that only takes just over 10oz at spot price to start hitting your allowance for none UK coins.

correct! so buy QB's / Sovereigns / Britannia's - and only "realise" CGT attracting ("foreign") coins below the threshold of £11,700 and just do that annually - the allowance is annual!!

[HawkHybrid]

I remember reading on the gov site that legal tender coins

are cgt free if they are not sold for more than 80% premium

to the melt value. if it fetches a high premium it's classified

differently.

https://www.gov.uk/guidance/investment-gold-coins-and-vat-notice-70121a

 

Quote

• 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

 

HH

[Pete]

I thought I once understood this but now I am confused.
For a coin to be legal tender it must show a face value and be accepted in banks - is this correct ?
No-one would hand over a £2 silver Britannia for £2 but would the banks accept it at face value and is it REALLY legal tender ?
If the answer is yes then how does this explain the silver £20 face value ( half oz fine silver ) WWII series of coins were declared not legal tender shortly after release ?

Added for those concerned about capital gains - you can gift stuff to your partner to effectively double the annual tax free allowance.
Something to consider if making a big gain when selling.
Also capital losses can be carried forward to offset future gains ( not sure if there is a time limit on carry forwards )

[HelpingHands]

24 minutes ago, Pete said:

I thought I once understood this but now I am confused.
For a coin to be legal tender it must show a face value and be accepted in banks - is this correct ?
No-one would hand over a £2 silver Britannia for £2 but would the banks accept it at face value and is it REALLY legal tender ?
If the answer is yes then how does this explain the silver £20 face value ( half oz fine silver ) WWII series of coins were declared not legal tender shortly after release ?

Added for those concerned about capital gains - you can gift stuff to your partner to effectively double the annual tax free allowance.
Something to consider if making a big gain when selling.
Also capital losses can be carried forward to offset future gains ( not sure if there is a time limit on carry forwards )

Businesses including banks do not have to accept all notes and coins offered by a customer even if they are legal tender.

They shouldn't be refused for debt repayments.

I think the Royal Mint wrote to the banks about the £20 coins as they were minting them just for people to cash in to increase their credit card bonuses/airmiles.

A large company with a business account would probably have no problem banking them at face value.

I did wonder if you could bank them though the Bank of England like you can with old designs of banknotes.

[Guybrush]

15 hours ago, HawkHybrid said:

I remember reading on the gov site that legal tender coins

are cgt free if they are not sold for more than 80% premium

to the melt value. if it fetches a high premium it's classified

differently.

https://www.gov.uk/guidance/investment-gold-coins-and-vat-notice-70121a

Yes, this is what I read some years ago, thank you.  I think that means that the CGT free status can be a bit of a red herring.

 

For example lets say silver in 10 years is the same as now £11.45 and today you purchased 1 queens beast coin at say £35

In ten years 80% over value is only £41.22, that means if your coin sells for over 41.22 it looses it's CGT free status.  That link does not actually say anything about silver and gold does fair a little better at 80% of todays value.  Does silver even have such limits?

 

For gold this does mean that if premiums ever go over 80% they are not CGT free from what I can tell.

[Guybrush]

After reading that I see where my confutation came from.  That refers to businesses and the VAT status of the coin, not the CGT status so I must of read the same thing all that time ago.

 

That clears this up for me, thanks for your input and clarification  

[ken]

Hello all, this is the first time I am posting. I have only purchased 5 silver coins so far just to check out a dealer but have no real idea what I'm doing. Its all a bit confusing. I sort of get the idea of buying Britannia`s for the cgt advantage. So why would UK investors buy anything else? I see on YouTube people buying bars of silver and all sorts of foreign coins. Is it that you can buy these at a lower rate that off sets the tax advantage of UK coins in some way? 

I'm not sure whether to buy gold or silver at the moment. About the only thing I understand is the the storage issue. I have about £20k to invest initially. 

[Elements]

Hi Ken welcome to the forum. Realistically for the majority of collectors, CGT will rarely be an issue so most buy what they want/like. The annual allowance means you’d have to sell a lot of silver to go over this allowance, and if married you both have an annual allowance. Of course there are other assets that come under the CGT reportable umbrella like a buy to let house etc, so if you were to sell this house and in the same tax year sell some silver bars then yes it becomes an issue since for that year you’d need to declare all CGT liable assets bought/sold to get a final profit/loss. This would be a case where awareness, planning and timing of sales come into it.

Edit: I should add that with britannias not being liable for CGT then in the hypothetical situation above, they dont need to be included in the calculation. For me that would be the main advantage of britannias. Check with your own financial planner too would be my advice!

 

https://www.ukbullion.com/learning-centre/is-gold-bullion-exempt-from-capital-gains-tax

 

[ken]

Many thanks for the advice. 

[RoughDog]

On ‎09‎/‎12‎/‎2018 at 11:23, Guybrush said:

I guess the real question is what, if anything does the spot price have to do with it when selling.

Or can I buy a 1oz gold brit now, then have a rich friend give me £11,700 for it tomorrow! (Well any amount really, its CGT free)

 

Thankfully its just me being curious as I wont ever need to worry about CGT anyway

What would be really interesting is: -

Your rich friend sold you 100 x 1oz gold Britannias for £5 each then you sold them next day for £950 each.  😀