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The prime thing for Jane to recognise is that these collections are not hers. They belong to her father and she should be very wary of taking matters into her own hands, even if she has power of attorney. All sorts of family problems could arise, aside from any tax issues.
Both collections are regarded as chattels, or to give them their proper name, tangible movable property. A special capital gains tax relief applies to such assets. The rules are as follows:
1. There is complete exemption if the market value of the asset on disposal is £6,000 or less.
2. If market value exceeds £6,000 the chargeable gain is limited to five-thirds of the excess.
The Stamp Collection
Jane has a big job on her hands in that she will need to get an individual valuation on all the stamps within the collection. Those with a value of £6000 or less can be ignored but with this caveat…. If the collection includes sets of stamps then the set is regarded as one asset.
Unless the collection includes a few penny-reds or penny-blacks the likelihood is that no one stamp or no set will exceed £6000 in current value. If it does then Jane will have to somehow calculate the gain. This involves comparing the sale or market value with the original cost price. Will there be any record of the acquisition date and cost? This is very unlikely and Jane will have to do the best she can. If estimated figures are used these need to be disclosed and HMRC given the opportunity to make their own checks.
Any chargeable gain will have the benefit of the father’s annual exemption of £12,300. Any residue will be taxed to CGT at 10% or 20%, depending on the level of the father’s income.
The Coin Collection
Sterling currency is exempt so Jane needs to go through the collection and identify:
- any pre-1837 sovereigns
- all pre-decimal coins
- all large 5p, 10p and 50p coins that have been demonetised
- any foreign coins
The rest can go back into the container.
Next Jane has to eliminate any coins or sets with a current value not exceeding £6,000. An example of a set would be the commemorative issue of a set of coins at some important historical event such as the accession of a new sovereign to the British throne.
The likelihood is that no coins will be left as potentially chargeable. If there are valuable ones (or sets) then Jane has the problem of establishing an approximate acquisition date and value. She may be glad of some assistance from a numismatist who deals in such things.
Inheritance Tax
Suppose Jane’s father dies before she can sell the two collections. What happens then?
Sadly the collections will form part of her father’s estate and the total value will be potentially chargeable to IHT at 40%. The chattels exemption will be of no help now because it is a CGT relief.
Jane really needs some tax planning advice rather urgently, especially as there are other assets of value in the family home to be considered - a grandfather clock, a pair of shotguns, an antique desk and chair, two matching original paintings… they are all waiting to be taxed!
C&H Stedman are happy to advise on these and related issues.
