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Classic cars - CGT

LynWestLynWest Well-KnownRegistered Posts: 122
in General accounting discussion
Just a quick question. A client has said that he has bought and sold a couple of Ferrari's in the last year and earned a small profit. However, it totals more than the CGT annual allowance. I do not do a lot of CGT work. However, somewhere in the back of my brain i seem to remember that classic cars are exempt from CGT? Does anyone know if that is right please?

Comments

  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderModerator, MAAT, AAT Licensed Accountant Posts: 1,431
    Yes, all cars (not used for business) are exempt from CGT.
  • LynWestLynWest Well-Known Registered Posts: 122
    Thannks Marie x
  • KernowAccountantKernowAccountant Settling In Nicely Registered Posts: 120
    MarieNoelle said:

    Yes, all cars (not used for business) are exempt from CGT.

    This implies that "cars" will be chargeable assets if used for business purposes. That is not correct, all "cars" falling within s.263 TCGA 1992 are exempt assets regardless of business use.
  • KernowAccountantKernowAccountant Settling In Nicely Registered Posts: 120
    edited September 2015
    LynWest said:

    Just a quick question. A client has said that he has bought and sold a couple of Ferrari's in the last year and earned a small profit. However, it totals more than the CGT annual allowance. I do not do a lot of CGT work. However, somewhere in the back of my brain i seem to remember that classic cars are exempt from CGT? Does anyone know if that is right please?

    Have you considered wether your client could be trading (and hence such profits subject to income tax)? A single transaction could amount to a trade.
  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderModerator, MAAT, AAT Licensed Accountant Posts: 1,431
    edited September 2015
    KernowAccountant said:

    MarieNoelle said:

    Yes, all cars (not used for business) are exempt from CGT.

    This implies that "cars" will be chargeable assets if used for business purposes. That is not correct, all "cars" falling within s.263 TCGA 1992 are exempt assets regardless of business use.
    Sorry this wasn't clear. I was going to write all cars until I checked the .gov website which states
    "You don’t pay Capital Gains Tax on:
    your car - unless you’ve used it for business [...]"


    I think they meant what you have rightly pointed out in your last comment.
  • LynWestLynWest Well-Known Registered Posts: 122
    Thanks all. He has said that he is not classed as a trader until he sells 6 cars a year? Not sure if this is for him needing to guarantee the condition of the cars when he sells them as he is expected to have knowledge of cars or from a tax point.

    When he mentioned it to me i said my gut feeling was that they were exempt however, if he is buying in order to turn them around and make a profit HMRC might decide that he is trading and therefore it is income. However, i said that i would look into it further for him.

    He has bought 3 ferrarri's (nice, wish i could) and sold two of them. I suppose it comes down to his intentions when he bought them. He says that he is not going to sell the third, but keep it for his children. If he continues to buy them, then he is going to start to have trouble convincing HMRC that it is not an income stream.
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