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Thread: Tax advice gold sovereigns

  1. #1

    Tax advice gold sovereigns

    My accountant is on holiday and I need some tax advice.

    I want to buy some gold sovereigns within my company.

    they are legal tender and so capital gains tax does not apply. Does this mean any gain or loss is also not taxable as profit?

  2. #2
    I don't think it's quite a simple as that. If buying within the company then they are to be an asset of the company, and as such when sold could be taxed as profit. The capital gains allowance is aimed at investors (private individuals) who invest in legal currency of UK designation, ie Britannias, sovereigns, etc.
    Have a look here
    https://taxfreegold.co.uk/capitalgainstax.html
    Some interesting info but still not completely watertight.

  3. #3
    If your Limited company buys them then HMRC (I Tthink I am right in saying) will treat that as an investment. It will be no different than interest in other words it taxed if the company makes a profit. Capital gains will not apply that allowance is geneally for an individual. I would suggest depending on the amount you wish to buy if you buy them personally assuming you have the cash they you can use your personal CGT allowance to offset any profit. Is going going to go up that mcuh though ??

  4. #4
    Zi was under the impression they can't be taxed as capital gain because the are legal currency. Surely it does not matter which entity holds them?

  5. #5
    Quote Originally Posted by wildrover77 View Post
    Zi was under the impression they can't be taxed as capital gain because the are legal currency. Surely it does not matter which entity holds them?
    It matters which legal entity owns them as differetn tax rules apply to how profit is treated - with regard to them being currency thats right but if you are trading in them for profit you are not spending them. If you had a pile of white fivers they are worth more than 5 today so you would not spend them but if you had enough of them and auctioned them off sure;y that would be a CG ? I think a professional accountants advice is in order here.

  6. #6
    why not put them into a SIPP?

  7. #7
    As post #6 that would be my choice.

  8. #8
    Quote Originally Posted by Ziplobb View Post
    It matters which legal entity owns them as differetn tax rules apply to how profit is treated - with regard to them being currency thats right but if you are trading in them for profit you are not spending them. If you had a pile of white fivers they are worth more than 5 today so you would not spend them but if you had enough of them and auctioned them off sure;y that would be a CG ? I think a professional accountants advice is in order here.
    Absolutely I have made contact with another accountant. I was hoping I would not just be lumbered with armchair experts replies on here!

    i will post the advice given when I receive it.

  9. #9
    With regards to the purchase of the Sovereigns (minted after 1837), certain aspects of the transaction is supported by tax legislation which is fairly straight forward and certain aspects are open to HM Revenue & Customs interpretation as I will discuss below.

    The purchase of the Gold Sovereigns is exempt from VAT.

    The Capital Gains Tax rules will apply from a corporation tax perspective in that there would be no chargeable gain on the disposal of the coins. This exemption only applies if the gold coins are UK sterling currency and as per HMRC legislation the exemption is limited to Sovereigns minted after 1837, plus Britannias.

    The element of the transaction that could be open to interpretation and deemed taxable would be whether of not HMRC class the transaction as a trading activity rather than an investment. HMRC could look at the transaction and compare this to various “Badges of Trade” should they deem there to be enough of a trading element met, then the transaction would be classed as trading and any profit would be subject to Corporation Tax, rather than as an investment which is subject to, and exempt from, Capital Gains Tax.

    The various “Badges of Trade” that HMRC would review, should the transaction be looked into, can be found at https://www.gov.uk/hmrc-internal-man...anual/bim20205.

    As you will see from this guidance, there is interpretation and judgement involved. What goes in your favour when considering whether this is trade or not would be that it is a one off transaction and nothing is being done to the asset to increase its value. If the asset is held for a reasonable length of time and you do not have borrowings financing this purchase, this also increases the argument that it is an investment and not a trading activity.

    Please review the above and it may be useful to contact me to discuss the various elements that bolster the argument that this is an investment.

    Regards,

  10. #10
    Quote Originally Posted by wildrover77 View Post
    With regards to the purchase of the Sovereigns (minted after 1837), certain aspects of the transaction is supported by tax legislation which is fairly straight forward and certain aspects are open to HM Revenue & Customs interpretation as I will discuss below.

    The purchase of the Gold Sovereigns is exempt from VAT.

    The Capital Gains Tax rules will apply from a corporation tax perspective in that there would be no chargeable gain on the disposal of the coins. This exemption only applies if the gold coins are UK sterling currency and as per HMRC legislation the exemption is limited to Sovereigns minted after 1837, plus Britannias.

    The element of the transaction that could be open to interpretation and deemed taxable would be whether of not HMRC class the transaction as a trading activity rather than an investment. HMRC could look at the transaction and compare this to various “Badges of Trade” should they deem there to be enough of a trading element met, then the transaction would be classed as trading and any profit would be subject to Corporation Tax, rather than as an investment which is subject to, and exempt from, Capital Gains Tax.

    The various “Badges of Trade” that HMRC would review, should the transaction be looked into, can be found at https://www.gov.uk/hmrc-internal-man...anual/bim20205.

    As you will see from this guidance, there is interpretation and judgement involved. What goes in your favour when considering whether this is trade or not would be that it is a one off transaction and nothing is being done to the asset to increase its value. If the asset is held for a reasonable length of time and you do not have borrowings financing this purchase, this also increases the argument that it is an investment and not a trading activity.

    Please review the above and it may be useful to contact me to discuss the various elements that bolster the argument that this is an investment.

    Regards,
    its very interesting to read although there is always concern with HMRC when its open - I would imagine most trading companies can prove that buying & selling is outside of their usual activity.

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