CGT/income/trader/business enquirey

[Spectre77]

Hi everyone! I have few questions relating tax payable on bullion and I would really appreciate if people here can provide any advice. 

So I was wondering if someone can have a business account but at the same time use their personal CGT allowance separately for own investments? If so, for how long do you think someone has   to keep an investment before you sell it so it's not taxed as an income but as CGT? 

Also, regarding the VAT threshold which is £85k at the moment, is it payable on anything you sell as long as it's going over that amount or gold will be exempt no matter the total value of sales? For instance, if you sell £100k silver and £100k gold-do you pay the VAT on silver only or on gold as well (I know that generally gold is VAT excempt but wanted to double check)? Also, how about silver imported from EU-could you claim VAT on that? 

Thanks in advance

[BackyardBullion]

The following is not formal tax advice, it is just my experiences and interpretations. 

Be ready for a long read, I love to ramble!

Business vs Personal investments

This is going to come down to whether the items you have sold are deemed to be a business asset (if you were audited by HMRC for example). 

There are these things called "Badges of Trade": https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim20205

In a nutshell they are a series of tests to see if what you have is a personal investment or something you are trading with. 

If you buy lots of things, hold them for a very short time, sell them regularly with the intention of making money then this is trade and it is taxable. You would need to register as self employed and fill a tax form declaring your profit/loss. 

The difficulty comes when you decide to keep things for longer. So, for me I look at the length of ownership and pride of ownership as the key indicator that some things are a personal investment and not a business asset. 

My example would be I have some 2018 oriental border britannias. I have had them since 2018. I have showed them off on my YouTube channel and they form part of my collection. If I decide to sell them in 2020 then I have owned them for a long time compared with other stock I have sold and I would feel confident arguing that case with HMRC if I was challenged. So, I would not include them in my business trading activities (for VAT or Income tax). 

If, however, I bought a bunch of them right now and sold them quickly on the forum then there might be a harder time explaining that to HMRC. That said, if you did this one time you would probably be OK as there is a badge of trade indicating the frequency of similar trades. It is all about interpretation. 

VAT

Gold is VAT exempt - which is very different to Zero rated. Zero rated items still count for your total turnover registration requirements but EXEMPT items do not. 

This is an important distinction because, for example, selling silver to people outside the EU is ZERO rated, not exempt. This means it still counts for turnover. 

Once you are registered for VAT it is everything you sell that VAT is applicable to. Some items will be ZERO rated and some will be EXEMPT. 

My business is a great example. We went over the threshold in 2019 so had to register for VAT. Our turnover for ZERO rated or VATABLE items was over the threshold. However we also had some EXEMPT items in our turnover which did not count. So we had a total turnover of about £95,000 but of that about £8000 just did not count towards the registration threshold. 

So in the example you state, if your business sells £100,000 silver and £100,000 gold in a year you would have to register for VAT (your VATABLE turnover is more than £85,000). You would be required to register only when your silver sales hit £85000 and then the remaining sales (£15,000 for the rest of the year) would need VAT. The gold is exempt so would not count towards the turnover calculation and would not be VATABLE after registering either. 

Once you are registered for VAT you can claim back VAT from purchased made. So, if you bought silver from a UK dealer for yourself to retail, you can claim the purchase VAT back. But then you have to charge VAT when you sell it. VAT is always passed down the chain to the customer. 

Don't take my word for it though

So, as I said, this is not advice and I may have got some things wrong/interpreted things differently. I am certain there are a plethora of accountants lurking on this forum and any that would like to correct anything I have said please share!

[Spectre77]

10 minutes ago, BackyardBullion said:

The following is not formal tax advice, it is just my experiences and interpretations. 

Be ready for a long read, I love to ramble!

Business vs Personal investments

 

Thank you so much, BYB for sharing your experience and opinion-this is extremely informative for me (and hopefully for other members). I will look for an accountant soon just to clarify more things but this is definitely a good base for my understanding of taxes.