Tax question - selling a record collection.

nottsmagpie

Hi all
Bit in the dark on this and hoped someone might be able to offer a guide.
I've got around 3000 records that I've collected over the past 15 or so years, bought for collecting and DJing purposes. Time is nearly upon me to start to sell them but I'm wondering about the tax implications. Bearing in mind that I bought these from all over the place - paid cash, paypal, cheque, credit card, did swaps etc, it's impossible to say exactly how much was paid for each one. Plus lots were bought in foreign currency.

So if/when I come to sell them, how do I handle it for the tax man? I'm a freelancer so I don't want it part of my business - want to keep it separate, but how do I even go about creating books for these? Bearing in mind that there are some marketplace-wise high end records here, the gains on some of them are going to be significant (not arrogance, based on market-knowledge) Is it a capital gains things or income thing or what?

Hope someone can offer advice on book keeping the selling of a record collectin (guess it's like selling any personal collection really?)

thanks a lot

Mikeyorks

http://www.hmrc.gov.uk/cgt/possessions/basics.htm

If they're worth over £6k then there's a potential Capital Gains Tax liability. If you follow the link above it gives a more or less step by step guide. Read the para on 'sets of possessions' in particular.

If these are your only gains - you have a £10600 allowance this year. So spreading the sales over more than one tax year is sensible if the collection is above £10600 (less purchase and selling costs)

nottsmagpie

Mikeyorks wrote: »

If they're worth over £6k then there's a potential Capital Gains Tax liability. If you follow the link above it gives a more or less step by step guide. Read the para on 'sets of possessions' in particular.

If these are your only gains - you have a £10600 allowance this year. So spreading the sales over more than one tax year is sensible if the collection is above £10600 (less purchase and selling costs)

Thanks - I actually found a section on the hmrc site but can't post a link because I'm a new user. Example 2 goes like this

"Ravi stays at home looking after his twin 18 month old daughters whilst his wife works full-time.
During a spring-clean, he finds his old collection of cricket magazines and Wisden books, and decides to get rid of them as they are taking up space.

He advertises all the items for sale in the classified section of a magazine and sells them for £80. Encouraged by this he has a rummage in his garage and finds a number of other items he can auction. In the next month, he sells five items for a total of £120. Later in the year, he sells his old car for £300. Over the next 12 months, Ravi sells another ten personal items in this way, for a total of £140.

Ravi is not trading. There is nothing commercial about this. His original purchases were for personal use and he is selling items that he has owned for some time. None of his personal items were individually worth more than £6,000 when sold. These are exempt from CGT as ‘chattels’."

Mikeyorks

Lovely story.

But you're looking at the wrong bits. That must relate to Income Tax ............ in particular 'am I trading if I sell my personal stuff on Ebay etc'?

This is nothing to do with Income Tax ..... but most personal possessions are subject to CGT if you sell them at a significant gain. Which is what you were asking.

Bit more detail on that here :

http://www.hmrc.gov.uk/cgt/intro/when-to-pay.htm

Cook_County

Chattels are not entirely CGT exempt but in practice unless any specific record is really really valuable the chattels exemption should cover this sale. You might want to learn more about this valuable exemption first.

ceeforcat

Agreed Cook County - MikeYorks what would be your view on the legislation relating to sets regarding these records given that it is unlikely that any individual item would be worth more than £6000? How on earth does one quantify a set in this instance other than the wonderful nostalgic purchases of a boxed set (of which I have a few he says irrelevantly)?

AirlieBird

Mikeyorks wrote: »

But you're looking at the wrong bits. That must relate to Income Tax

Nope. It is an example that is supposed to "help you work out if you are trading and liable for VAT or whether you have to declare a capital gain."

nakmeister

There used to be something in the HMRC manuals specifically about sets of assets and chattels rules, but appears to have disappeared, or moved anyway. Found this helpsheet though:

http://www.hmrc.gov.uk/helpsheets/hs293.pdf

One of examples it mentions is books by the same author or on the same subject which would be a set. If your record collection is quite diverse, there's a strong argument to say that it's not one set. There might be an argument that all the records for one particular artist might be a set, but as long as none of these artist sets are worth more than 6k you should be alright. Even if one or two sets go above the limit, if you split them and sell separately to persons who aren't connected with one another, you don't need to group them as a set so should still not have any tax to pay.

nottsmagpie

Thanks for all the input folks. Ok, this is the bit that I'm getting stuck on.
If I'd bought these individual records to resell I guess I'd have acted like a trader and kept records of what each piece cost etc with a view to working out net profit (Capital gains?) when I came to sell them. The reality is, I amassed this collection over a 15 year period with no other thought in mind than to collect records - vinyl junkie! So if they are liable to Capital Gains how can I quantify the gains when there's no record of what they cost in the first place. In some instances the resell value may actually result in a loss, but apart from relying on memory, how can I 'prove' this? I don't think I can. Which is where I'm stuck. It's almost like saying I'm starting a shop with a load of 'free' stock so my Capital Gains would be 100% (?) or maybe not.

The question of 'sets' is interesting. There would be several releases by the same artist in the collection but by and large the majority are one-offs no-hit wonders.

Bearing in mind that I'm in employment (freelance/self employed with a regular income) my story differs somewhat from "Ravi's". I guess I already have my £10600 allowance covered quite well. What a minefield!

ceeforcat

The point that you make regarding sets is what I was driving at and I believe that there is an argument for saying that none of your records fall into this category. I would also agree that the sale does not consitute 'trading' under the old 'badges of trade' e.g. no profit motive at purchase, no frequency of trading etc.

Hopefully some other sage will enlighten further. Personally, and only personally, I would sell away.

By the way the £10600 CGT allowance is available in addition to your personal tax free allowance that you have against your employment income.

Mikeyorks

ceeforcat wrote: »

Agreed Cook County - MikeYorks what would be your view on the legislation relating to sets regarding these records given that it is unlikely that any individual item would be worth more than £6000? How on earth does one quantify a set in this instance other than the wonderful nostalgic purchases of a boxed set (of which I have a few he says irrelevantly)?

That it's not a 'set' ....... it's a collection. I only used the term 'set' earlier because that's the overall term HMRC use on the link I gave. The £6k exemption in such a case applies to the collection and not individual items.

Trading doesn't appear to come into it - but CGT is a definite potential depending on value. But selling within the annual allowance should be possible.