CGT when swapping

[Timberwolf]

Hello All, 

Bob lives in the UK. He bought gold bars several years ago. Bob is now considering swapping the gold bars at a bullion dealer for CGT exempt coins. The dealer would issue store credit for the value of the bars, with which bob would buy the CGT exempt coins.

As no cash is changing hands - would Bob need to disclose this swap to HMRC and pay CGT? Bob would be stacking the new CGT exempt coins for at least 5-10 years. 

Thanks!

[James32]

I believe the dealer would be forced to give you a purchase receipt on entry and a sales receipt on exit?

@BackyardBullion is this right when swapping?

Edited August 28 by James32

[Bruce06]

I believe technically, as long as possession of the original item is transferred, a sales transaction is taking place, and this means profit/loss has to be counted n reported, regardless receiving cash or a credit for future spending.

[Anteater]

CGT is on a "disposal", it's not specific to a sale. It even applies if you're giving an asset with a gain as a gift!

So yes, it would still apply.

[BackyardBullion]

Yep, if you are swapping then you are disposing. 

Check out the rules on Chattels though, anything for less than £6000 could be exempt from CGT calculations. 

Not financial advice. 

[Brit2023]

Good luck, Chattels are a loophole minefield 

[BLOOMMAN101]

Interesting vid from BYB this week for anyone who missed it 

 

[Timberwolf]

Thanks for the replies all, very helpful.

Am I correct in assuming that the proper way to proceed once I've swapped my bars, would be to list each bar individually on the HMRC capital gains tax reporting site, giving it's value when bought and the value I sold it for? I assume the site would then allow me the first £3000 tax free, then proceed to tax me on the amount above this? Or do I simply not disclose the first £3000 profit to them at all?

Also for the amount I'm "disposing" each bar for (98% of spot) - I assume the sales invoice is going to just show the total amount of weight of gold and the total amount I'm receiving in store credit (all bars totalled). Do I just calculate the 98% of spot (when price locked in) for a given bar and give that as the sold for price to HMRC? Or do I need to get the bullion dealer to list each bar/item individually with the price they're giving me, so that I don't need to estimate each bar's worth to HMRC?

Again many thanks!

[HowardW]

17 hours ago, BackyardBullion said:

Yep, if you are swapping then you are disposing. 

Check out the rules on Chattels though, anything for less than £6000 could be exempt from CGT calculations. 

Not financial advice. 

My understanding is that a gold bar is not a chattel.

 

Agree with the overall advice - a swap is a disposal for CGT purposes. 

5 hours ago, Timberwolf said:

Thanks for the replies all, very helpful.

Am I correct in assuming that the proper way to proceed once I've swapped my bars, would be to list each bar individually on the HMRC capital gains tax reporting site, giving it's value when bought and the value I sold it for? I assume the site would then allow me the first £3000 tax free, then proceed to tax me on the amount above this? Or do I simply not disclose the first £3000 profit to them at all?

Also for the amount I'm "disposing" each bar for (98% of spot) - I assume the sales invoice is going to just show the total amount of weight of gold and the total amount I'm receiving in store credit (all bars totalled). Do I just calculate the 98% of spot (when price locked in) for a given bar and give that as the sold for price to HMRC? Or do I need to get the bullion dealer to list each bar/item individually with the price they're giving me, so that I don't need to estimate each bar's worth to HMRC?

Again many thanks!

In my experience, no need. If the total of your CGT-able disposals is over the HMRC limit (think will be £9k this tax year) or your CGT-able profit is over £3k this year, you have to add in an excel listing the disposals.

I've always made a simple list - "100g gold bar", "Canadian Maple Leaf 1oz gold coin" etc - and never had any questions.

As regards, sales price (and purchase price), again just do something sensible. E.g., if you sold 5 x 100g bars for £30,000, you would allocate the sales proceeds as £6k per bar

As regards the £3k CGT-free limit, if you have to provide the list of disposals, don't deduct the £3k - the tax form asks for total profit and deducts the £3k for you. (Some wrinkles if you have items sold at a loss/carried forward losses from previous years but sounds like these won't apply)

Edited August 29 by HowardW
added more

[Timberwolf]

31 minutes ago, HowardW said:

My understanding is that a gold bar is not a chattel.

 

Agree with the overall advice - a swap is a disposal for CGT purposes. 

In my experience, no need. If the total of your CGT-able disposals is over the HMRC limit (think will be £9k this tax year) or your CGT-able profit is over £3k this year, you have to add in an excel listing the disposals.

I've always made a simple list - "100g gold bar", "Canadian Maple Leaf 1oz gold coin" etc - and never had any questions.

As regards, sales price (and purchase price), again just do something sensible. E.g., if you sold 5 x 100g bars for £30,000, you would allocate the sales proceeds as £6k per bar

As regards the £3k CGT-free limit, if you have to provide the list of disposals, don't deduct the £3k - the tax form asks for total profit and deducts the £3k for you. (Some wrinkles if you have items sold at a loss/carried forward losses from previous years but sounds like these won't apply)

Thanks for the reply HowardW, much appreciated. You mention that you track your disposals in an excel sheet - how and when are you submitting this each year?

[Brit2023]

Easiest way is to buy silver then you always sell at a loss……too da moon!!!!!!!

[HowardW]

6 hours ago, Timberwolf said:

Thanks for the reply HowardW, much appreciated. You mention that you track your disposals in an excel sheet - how and when are you submitting this each year?

On the CGT section, you just upload it (actually needs to be converted to pdf but it's anyway just an excel). I imagine not doing so when your profit is over £3k (or they know your disposals are over £9k) would attract attention. It's straightforward and all well explained when you complete the tax return. At the beginning, there are some basic questions - if I remember, are your CGT-able profits over £3k/disposals over £9k is one of them; answer yes and the CGT section is ready and waiting for you

[Brit2023]

You haven’t said weight and quantity but If the gain on the bars is below £3k and it is the only capital gain then no reporting is required. Also if the gentleman has a wife or partner then their allowance would be another £3k so take items in separately if it then doesn’t trigger a gain if split between them. 
He can gift the partner £3k worth of gold which will tax free under gift allowance rules( or £6k if you haven’t used the allowance the year  before). 
winner winner chicken dinner…well apart from for the chicken👍🏽
 

[HowardW]

24 minutes ago, Brit2023 said:

You haven’t said weight and quantity but If the gain on the bars is below £3k and it is the only capital gain then no reporting is required. Also if the gentleman has a wife or partner then their allowance would be another £3k so take items in separately if it then doesn’t trigger a gain if split between them. 
He can gift the partner £3k worth of gold which will tax free under gift allowance rules( or £6k if you haven’t used the allowance the year  before). 
winner winner chicken dinner…well apart from for the chicken👍🏽
 

Not quite correct...there is a reporting requirement if proceeds are over a certain amount, regardless of the amount of gain. It is usually 3x the tax free limit, so expect to be £9k for this year. meaning if the proceeds are over £9k you will have to report regardless of the actual profit

[Bratnia]

Sorry, but to add yet further confusion/complexity, HMRC might consider any gain to be relative to your average overall cost. I suspect you may not for instance, as a example, be able to say you've sold a particular 1 ounce Britannia gold coin that you purchased for £1500, and sold for £1900, if you also hold another 1 ounce Britannia coin that you bought for £1000. Unless a distinguishable collectible coin. Your capital gain would be deemed to be the price sold / average price paid, £1900 / £1250. not £1900/£1500 (where the cost of the remaining coin remains the same £1250 value).

Maybe for serial numbered bars you might be able to claim individual bars gain value rather than the average price paid. However gold is fungible, could for instance be melted and formed into a new bar and stamped with a serial number of another bar such that it was indistinguishable. UK taxation is way too over-complicated and the rule book too thick but also too vague. In the case of contest I imagine individuals are more inclined to be on the losing side. Very much feels like a means to have 'everyone is guilty' unless they can prove otherwise, and as everyone is guilty the state can monitor/track all open prison inmates via street cameras, GPS/mobile, online activities etc.

 

[Bratnia]

Family and friends?

Bob lives in Upper Goldstone in Kent with his wife Claire and they have two teenage children, none of which will be using their yearly CGT allowance, its mid/late March 2025.

Bob has £48,000 of gold bars that he bought for a £24,000 average price.

Bob lends £6000 to each of Alice/Claire/Dave, for a month, for a low interest rate, £25, 5%/year pro-rata. Bob sells gold to each of Alice, Claire, Dave at cost, £3000 each, in the old financial year, and repeats that again in the new financial year. Around the same time they all visit a dealer and swap (sell/buy) £6000 worth of gold for Britannia's. Relative to cost they've each made a £3000 capital gain, which is their yearly tax exempt allowance amount, so no tax payable.

After their visits to the gold dealer in mid March and again in mid April, Alice/Claire/Dave each opt to sell their Britannia's to Bob for £6000 and repay their loan. Bob now owns £48,000 of Britannia gold coins.

Edited August 29 by Bratnia

[Timberwolf]

Thanks for the replies all! I really appreciate the help and knowledge. This has given me much to think about!

 

[Bratnia]

13 hours ago, Timberwolf said:

Thanks for the replies all! I really appreciate the help and knowledge. This has given me much to think about!

You may be able to offset capital gains with capital losses elsewhere. Spanish six year old niece painted a masterpiece that you paid £100,000 for. Sadly under forced sale conditions your local art dealer only managed to sell it for a tenner.

In November 2012, Royal Red and Blue painting by Mark Rothko sold for $75.1 million at a Sotheby’s New York. 

[FriedrichVonHayek]

I have a decent amount of Silver Bars, so I take it if I sell one or two bars every tax year there's no need to trouble the taxman.

[Bratnia]

31 minutes ago, FriedrichVonHayek said:

I have a decent amount of Silver Bars, so I take it if I sell one or two bars every tax year there's no need to trouble the taxman.

Anytime you call HMRC you may be waiting 40 minutes to get through, clearly they're very busy so best to avoid burdening them in any way  Avoid paying taxes to help HMRC employees to better work from home and reduce down to 4 day weeks.

HowardW earlier indicated that up to £9,000/year (under 3 times the yearly £3000 capital gains tax allowance) and less than £3000 profit and yes, nothing to report. As I suggested earlier however I'm not sure its actual individual coins gains, the coin (bar) you're selling for £22 cost £15 to buy, £7 profit/gain, and you're selling 400 of them for a total of £8800 and a profit of £2800, which being under your £3000 year capital gains allowance  and under the £9000 value level excuses any reporting requirements; But rather your overall average cost of all of the silver you bought/hold, which may be lower than specific individual coins cost of purchase. Average price paid £4/oz, selling £8800 value 400 oz, cost of purchase 400 x £4 = £1600, capital gain £8800 - £1600 = £7200, which being over your £3000 yearly allowance should involve reporting and paying the capital gains tax on 7200 - 3000 = 4200 taxable profit x 20% tax rate = £820 tax payment due.

Failure to correctly account/report could involve a investigation/prosecution, having to pay a fine and penalties. Better to err on the side of caution and calculate both ways and apply the lower level to be more certain of not having run foul.

[FriedrichVonHayek]

15 minutes ago, Bratnia said:

Anytime you call HMRC you may be waiting 40 minutes to get through, clearly they're very busy so best to avoid burdening them in any way  Avoid paying taxes to help HMRC employees to better work from home and reduce down to 4 day weeks.

HowardW earlier indicated that up to £9,000/year (under 3 times the yearly £3000 capital gains tax allowance) and less than £3000 profit and yes, nothing to report. As I suggested earlier however I'm not sure its actual individual coins gains, the coin (bar) you're selling for £22 cost £15 to buy, £7 profit/gain, and you're selling 400 of them for a total of £8800 and a profit of £2800, which being under your £3000 year capital gains allowance  and under the £9000 value level excuses any reporting requirements; But rather your overall average cost of all of the silver you bought/hold, which may be lower than specific individual coins cost of purchase. Average price paid £4/oz, selling £8800 value 400 oz, cost of purchase 400 x £4 = £1600, capital gain £8800 - £1600 = £7200, which being over your £3000 yearly allowance should involve reporting and paying the capital gains tax on 7200 - 3000 = 4200 taxable profit x 20% tax rate = £820 tax payment due.

Failure to correctly account/report could involve a investigation/prosecution, having to pay a fine and penalties. Better to err on the side of caution and calculate both ways and apply the lower level to be more certain of not having run foul.

The bars I've got have been melted and assayed from scrap Silver, I have kept the receipts for the postage and the cost of assaying, but I've only a rough estimate of how much the scrap Silver cost as its been bought piecemeal from various auctions and eBay.

 

Edited August 31 by FriedrichVonHayek

[Bratnia]

22 hours ago, FriedrichVonHayek said:

The bars I've got have been melted and assayed from scrap Silver, I have kept the receipts for the postage and the cost of assaying, but I've only a rough estimate of how much the scrap Silver cost as its been bought piecemeal from various auctions and eBay.

I don't know what the official method should be in that case. Personally I'd just make a educated guess of the average price, a reasonable one, not one that could clearly infer you were heavily biased in your own favour, and run with that. It's not illegal to avoid paying tax, only tax evasion is illegal. You can for instance expressly include clauses in Wills that specifically state the tax- free allowance element rather than a specific monetary figure. If your reasonable intent is to dispose of the silver in a tax efficient/free manner and your claimed average price paid looks reasonable, with individual yearly sales matched to using each years capital gains tax allowance so as to avoid having to pay taxes then that's perfectly reasonable IMO. You wont have cheated either yourself or HMRC that way, other than not having been the most efficient/precise rate of allowable tax free disposals. I am however just a layman, professionals/experts in such matters might pipe in with a surprise.

[katyc]

Looks like we can dispose/sell up to 50k without reporting (as long as the CGT tax due is below 3k for this 2024/5 financial year onwards).

So you could sell CGT-free goods up to 50k, regardless of profit. Or you could sell Non-CGT-free items up to 50k as long as the profit is below 3k.

So, assuming I've read this right (please correct me if I'm wrong), here's a random example: 

This tax year (to 5th April 2025) you could sell £8,000 of taxable goods ensuring profit (gain) of those items is not above 3K. You also sell £41,999 of CGT free goods (profit not relevant because CGT free items). Total disposals £49,999. Taxable profits below 3k. No reporting required.

[katyc]

Above is from HMRC website BTW

[BackyardBullion]

7 minutes ago, katyc said:

Above is from HMRC website BTW

This is taken from the guidance on the self assessment form regarding the £50,000 reporting page 

You ignore any exempt assets when adding up your total sales.

So my interpretation is that you can sell any amount in CGT exempt coins and not have to report it.

Very important to have your records in order should HMRC ever challenge you you have the evidence to support your actions.

This is not financial advice.