VAT on physical Silver Bars?

ian-d

From what I understand, VAT is chargeable on Silver but not on Gold. However, I'd like to purchase physical 1kg Bars and Gold is out of reach, leaving me with a single option which is buying Silver and paying some element of VAT.

Has anyone had experience of buying from Jersey/Guernsey for example and how were you then charged the VAT if you decided not to pay it at their end, how do they collect this from you? Has anyone got away without paying, do they make mistakes and miss you? (talking bars here, no coins/currency).

Also, if I were to buy through my VAT registered business as an asset, I'd naturally avoid the initial VAT but would I then pay VAT on sale, as it doesn't seem brokers pay out VAT when buying.

Other than taking a trip to Guernsey and smuggling some back with me (not something I fancy doing), it seems investing in silver is very cost prohibitive versus Gold because of the taxation! Would be a long term hold, expecting more than 20% returns, but even still, means a large climb to make before it is profitable!

le_loup

ian-d wrote: »

Would be a long term hold, expecting more than 20% returns

He that expects nothing, shall not be disappointed.

ian-d

Apart from the wise words above, anyone got anything to add that may help me out?

bowlhead99

ian-d wrote: »

However, I'd like to purchase physical 1kg Bars and Gold is out of reach, leaving me with a single option which is buying Silver

The two metals have prices that move up and down over time on the commodity markets based on a range of factors. Many investors or speculators would at least make some attempt to evaluate the factors to attempt to determine which item would best meet their needs in terms of risk / return potential. Others would just go ahead and pick blindly, like a fool.

To have the choice made for you simply because you would like to hold a physical kilogram of whatever you buy, and you don't have the £24,000 for a kilo of gold but you do have the £300 for a kilo of silver, just sounds like you are letting life pick for you - effectively buying blindly, like a fool.

Gold is a lot more expensive per ounce. However, if they both have the same risk/reward potential, and there are massive percentage trading costs and extra taxes with silver, it would be crazy to buy silver, right? Particularly when the fact that you can't afford the 32 ounces of gold that make up a 1 kg bar of gold, can be very easily resolved - by simply buying 1 ounce bars, or half ounce bars, or 1 gram bars, or coins of whatever size you can afford. Is there any particular reason you need whole kilos of the stuff? Do you just need a really heavy paperweight? If so, perhaps investigate copper, or stone. Both of those are even more affordable than silver.

and paying some element of VAT.

If you don't need to physically take delivery of the metal, you can buy it in bond, where your 1kg bar will sit in a bonded warehouse (with everyone else's 1kg bars) without the VAT being paid. Same principle as crates of fine wine. At some point later you can sell it on to someone else (while still under bond), make your money and not pay any VAT. Only if the silver was going to be released free and clear into someone's ownership, would VAT need to be paid at that point.

However, clearly this won't work if the purpose is to have a set of shiny 1kg paperweights in your home.

Also, if I were to buy through my VAT registered business as an asset, I'd naturally avoid the initial VAT but would I then pay VAT on sale, as it doesn't seem brokers pay out VAT when buying.

If you have a VAT registered business, you know how VAT works. Claim back the VAT paid on your inputs and charge VAT on your outputs. So, the net result of the VAT exercise will be that VAT is charged on the 'value added'. The clue is in the name. You are planning for the silver to increase in value somehow. So, VAT on the value increase would erode your gain.

You say it doesn't seem brokers pay out VAT when buying? Have you attempted to invoice them for silver that your company was selling them and they refused? Presumably brokers are happy to follow the laws of the land and 'pay out VAT' when buying from you just like they are happy to follow the laws of the land and charge VAT when they sell it on to retail customers. Input VAT isn't a cost to the business - only un-reclaimable VAT is a cost.

Also -make sure you pay your corporation taxes when your company makes its net profit from buying and selling the silver.

Has anyone had experience of buying from Jersey/Guernsey for example and how were you then charged the VAT if you decided not to pay it at their end, how do they collect this from you?

I haven't bought gold /silver bars from Jersey / Guernsey but plenty of other things. You don't have an option to 'decide not to pay it at their end'. They do not have VAT, full stop. So the decision is made for you.

When you bring items into the country that you have purchased abroad (such as a 1kg bar of silver or gold) you always have the opportunity to declare them. Have you seen the red lanes at airports and ports? Simply tell them what you are bringing into the country and pay relevant VAT and duties. No rocket science involved. Feel free to just use the green lane instead; get picked out for a search, and have HMRC then scrutinise your affairs because they wonder what else you have been smuggling into the country and for how many years you have been doing it.

Other than taking a trip to Guernsey and smuggling some back with me (not something I fancy doing), it seems investing in silver is very cost prohibitive versus Gold because of the taxation!

If you invest in UK gold bullion coins they are exempt from capital gains tax and exempt from VAT. The larger denominations can be purchased for relatively low premiums over the spot price of the gold content and sold back to a broker for a relatively low discount to the spot price.

If you invest in silver it is not exempt from capital gains tax or VAT. So, if you felt the markets for the two commodities were going to behave exactly the same over the next x years, which they aren't, gold would be the more attractive proposition.

Would be a long term hold, expecting more than 20% returns, but even still, means a large climb to make before it is profitable!

An observation - money sitting doing nothing in a simple bank account with a long term hold can deliver more than 20% returns. Or, other investments can deliver much much more, with similar risk of loss to what could happen if you bought precious metals. The downside is that neither cash in a bank account, nor online share certificates, make very good paperweights.

I think your plan needs more work.

ian-d

Thanks for the detailed reply, as well as the insults and sarcasm!

I have considered the pros/cons of Gold v Silver and whilst Gold is prohibitive for my needs (1kg) bars, it isn't because I can't afford it, nor have I not considered the options.

I'm no fool and I have a very successful business thank you, I understand taxation, but haven't yet tested the process of selling Silver for spot.

Nothing to do with paperweights, but thanks for trying to be funny (it wasn't btw). It is to do with holding the physical Silver versus claimed holdings where you don't actually have a physical bar, merely an asset on paper. It is common knowledge that the banks, bullion dealers etc do not have enough physical Gold or Silver to cover customer holdings if everyone tried to take ownership at the same time; same as the banks with cash.

bowlhead99 wrote: »

I haven't bought gold /silver bars from Jersey / Guernsey but plenty of other things. You don't have an option to 'decide not to pay it at their end'. They do not have VAT, full stop. So the decision is made for you.

Incorrect, bullion dealers in Guernsey for example allow you to pay the UK vat at the time of purchase, or remove it, in the knowledge that customs would then charge on delivery, or whenever they request their share. They allow you a choice.

bowlhead99 wrote: »

An observation - money sitting doing nothing in a simple bank account with a long term hold can deliver more than 20% returns. Or, other investments can deliver much much more, with similar risk of loss to what could happen if you bought precious metals. The downside is that neither cash in a bank account, nor online share certificates, make very good paperweights.

So if money in the bank, nor precious metals are what you'd deem sensible investments, what would you suggest, as I'm certainly not delighted having money spread across multiple accounts which I now have to spread further due to the reduction in max protection offered.

le_loup

You seem to know all the answers.
Surprised you asked the question!

shaun_from_Africa

ian-d wrote: »

Incorrect, bullion dealers in Guernsey for example allow you to pay the UK vat at the time of purchase, or remove it, in the knowledge that customs would then charge on delivery, or whenever they request their share. They allow you a choice.

But in your opening post you were talking about going to Guernsey or jersey and buying the bullion there.
If you buy the bullion in Guernsey then it is sold VAT free and you don't get the option to pay the tax. If however they post it to the UK then you do get this option.


Going to Jersey to make the purchase is not quite the same as they have a 5% sales tax that applies to bullion.

grey_gym_sock

ian-d wrote: »

So if money in the bank, nor precious metals are what you'd deem sensible investments, what would you suggest, as I'm certainly not delighted having money spread across multiple accounts which I now have to spread further due to the reduction in max protection offered.

a sensible portfolio would usually be mostly in 2 asset classes:

1) equities

2) (government and corporate) bonds

if you wanted higher potential returns, at the price of greater risk, you'd have a high % in equities. if you wanted more stability, at the price of lower expected returns, you'd have a high % in bonds.

some portfolios would also have a % in:

3) real estate

and maybe a very small % in:

4) commodities (which includes precious metals)

if you're saying that your portfolio consists (or will consist) of just cash + silver, then that's a long way from being a sensible portfolio.

though to be fair, you can count cash as being similar to very short-term government bonds, so in a sense you have bonds covered. however, if somebody has a high % in bonds, then it's probably a bad idea to have all of it in short-term government bonds / cash.

cash is of course also a good idea for money that will / may be spent soon. i.e. it may make more sense to aim to have enough for N years' expenditure in cash, rather than to aim for X% of portfolio in cash.

puk999

So I seen that XXXX XXXX metals have started selling bullion on amazon uk...

Message marked as spam clearly touting for business.

redpete

ian-d wrote: »

I have considered the pros/cons of Gold v Silver and whilst Gold is prohibitive for my needs (1kg) bars, it isn't because I can't afford it, nor have I not considered the options.
...
Nothing to do with paperweights, but thanks for trying to be funny (it wasn't btw). It is to do with holding the physical Silver versus claimed holdings where you don't actually have a physical bar, merely an asset on paper. It is common knowledge that the banks, bullion dealers etc do not have enough physical Gold or Silver to cover customer holdings if everyone tried to take ownership at the same time; same as the banks with cash.

You haven't explained why it has to be a 1kg bar of silver vs a smaller amount (but same cost) of gold.
(and not so common knowledge about deposit holders not being able to cover customer deposits - I didn't know)

Nothing to do with paperweights, but thanks for trying to be funny (it wasn't btw).

Oh yes it was.

chewmylegoff

If your business is unincorporated but VAT registered you can only reclaim input VAT on business expenses. For the same reason that you can't buy your personal holiday through your VAT registered business and avoid the VAT you also cannot reclaim VAT on a silver bar.

If you have a company that is VAT registered then the the company could buy a silver bar as an investment for itself and claim the input tax back but it would have to pay output VAT when selling and then any gain would be attributable to corporation tax and then the distribution of the profit ax a dividend would be subject to income tax. If the business went bust then the silver bar would need to be sold to pay off some of your creditors.

If you just buy the silver yourself then any profit on sale is attributable to CGT charged at a lower rate. However, given that you are paying 20% VAT upfront you are unlikely to be troubled by tax on gains....

No one would invest in any other investment which charged such a large amount upfront so I don't know why anyone does this with silver. Just use a stocks and shares ISA to buy a silver ETF if you want exposure to silver.