Capital Gains Tax in an Auction Sale

andyst

My family are selling some items at an Auction House. Most are nominally valued, but there are a couple of items that may make a few thousand. Will the income be subject to CGT? (We didn't buy or were willed any of the items, it's just family stuff that's been in boxes for years and we're looking to auction it off.)
Also, if the income IS liable for CGT, the money will be divided equally between three family members so how will that affect things?
Many thanks,
Andy

poseidon1

Familiarise yourself with the £6,000 chattels CGT exemption per guidance below

https://www.gov.uk/government/publications/chattels-and-capital-gains-tax-hs293-self-assessment-helpsheet/chattels-and-capital-gains-tax-2022-hs293

Unless any single item ( or a set) exceeds £6,000 proceeds you should be outside the liklihood of a CGT liability.

andyst

Thanks for that - but a couple of the items may well sell for over £10,000 - that's what we're needing some info on. Also, the fact the we have no idea what when it was bought or what was paid for it initially, so how do we work out any 'gain'?

poseidon1

andyst said:

Thanks for that - but a couple of the items may well sell for over £10,000 - that's what we're needing some info on. Also, the fact the we have no idea what when it was bought or what was paid for it initially, so how do we work out any 'gain'?

You did read the link that gave a worked examples for proceeds between £6k to £15k ?

If you don't want to go to effort of reading helpful HMRC guidance, you can always enlist a tax accountant to calculate any liability for you.
 

DRS1

andyst said:

Thanks for that - but a couple of the items may well sell for over £10,000 - that's what we're needing some info on. Also, the fact the we have no idea what when it was bought or what was paid for it initially, so how do we work out any 'gain'?

Assume it cost nothing.

If it sells for under £15k you'll be using the other weird formula anyway.

Keep_pedalling

You say the items were not willed, but it sounds like they have been inherited as chattels at some point in the not too distant past and it is the value at the time they were inherited that sets the base from which CGT is calculated not the amount paid in the dime and distant past. You also have multiple owners, so if for example there are 3 of you and it sells for £12k, each share is £4k so there should be nothing to declare even if they were not inherited.

andyst

Thanks again everyone. Just need some advice on the matter of splitting the proceeds three ways. So say an item sells for £12,000; that's £4,000 each to the three people involved. Are we now exempt individually from CGT? Thanks in advance!

mybestattempt

andyst said:

Thanks again everyone. Just need some advice on the matter of splitting the proceeds three ways. So say an item sells for £12,000; that's £4,000 each to the three people involved. Are we now exempt individually from CGT? Thanks in advance!

If the chattels are owned in equal shares by by the three people involved then yes.

However, as @Keep_pedalling has indicated it's not clear how and when the chattels were acquired by those three people.

poseidon1

andyst said:

Thanks again everyone. Just need some advice on the matter of splitting the proceeds three ways. So say an item sells for £12,000; that's £4,000 each to the three people involved. Are we now exempt individually from CGT? Thanks in advance!

Following the guidance you first calculate the gain on the £12,000 proceeds and then divide that gain between the three people ( basic principle of taxation of jointly owned assets).

Therefore assuming this chattel was not recently inherited with a recent market value ( ie no attributable cost ) if you use  the 5/3 factor mentioned in HMRC guidance for the £12,000 proceeds (ie the 'weird' formula flagged by @DRS1 in his post) you get the following outcome: 

* £6000 x 5/3  = £10k gain

* £10k gain between 3  people is £3333

* £3333 exceeds the personal £3,000 annual CGT exemption, therefore in this case each person has a £333 taxable gain.

What you certainly  do not do  is simply divide the proceeds by three , and apply the £6,000 exemption in that way. 

As advised by Keep_pedalling, if some of these valuable chattels were actually recently inherited, ideally there should be some indication of an attempt to value them for probate purposes by the executors concerned , which could give you attributable base costs to minimise gains on sale. 

Be that as it may, as intimated in my earlier post, if you are unable to following HMRC guidance as well as  understand underlying fundamental capital gains tax principles, professional ( paid for) advice would clearly be appropriate.

At this moment and given the conflicting suggestions offered so far in this thread,  you may understandably be  inclined to give undue weight to suggestions that give you the most favourably outcome.

 If that be the case, and given your complete lack of knowledge from outset, I would then question the usefully of this thread not only to you but anyone else in a similar situation.

Keep_pedalling

It is difficult to advise when you give no information on how and when these items came to be owned by you and your siblings. So could you enlighten us please?

mybestattempt

poseidon1 said:

andyst said:

Thanks again everyone. Just need some advice on the matter of splitting the proceeds three ways. So say an item sells for £12,000; that's £4,000 each to the three people involved. Are we now exempt individually from CGT? Thanks in advance!

Following the guidance you first calculate the gain on the £12,000 proceeds and then divide that gain between the three people ( basic principle of taxation of jointly owned assets).

Therefore assuming this chattel was not recently inherited with a recent market value ( ie no attributable cost ) if you use  the 5/3 factor mentioned in HMRC guidance for the £12,000 proceeds (ie the 'weird' formula flagged by @DRS1 in his post) you get the following outcome: 

* £6000 x 5/3  = £10k gain

* £10k gain between 3  people is £3333

* £3333 exceeds the personal £3,000 annual CGT exemption, therefore in this case each person has a £333 taxable gain.

What you certainly  do not do  is simply divide the proceeds by three , and apply the £6,000 exemption in that way. 

As advised by Keep_pedalling, if some of these valuable chattels were actually recently inherited, ideally there should be some indication of an attempt to value them for probate purposes by the executors concerned , which could give you attributable base costs to minimise gains on sale. 

Be that as it may, as intimated in my earlier post, if you are unable to following HMRC guidance as well as  understand underlying fundamental capital gains tax principles, professional ( paid for) advice would clearly be appropriate.

At this moment and given the conflicting suggestions offered so far in this thread,  you may understandably be  inclined to give undue weight to suggestions that give you the most favourably outcome.

 If that be the case, and given your complete lack of knowledge from outset, I would then question the usefully of this thread not only to you but anyone else in a similar situation.

Sorry, but I disgree as your reference to a "basic principle" for jointly owned property is not correct.

CGT is chargeable on an individual. Where an asset is jointly owned the capital gain arises on the individual's share of the asset; that is their share of the consideration less their share of the acquisition value/costs and other allowable costs. 

In practice the disposal of a asset by joint owners may give rise to the same capital gain for each, but that is simply because their respective shares of the consideration and value/costs are the same.

Similarly, so far as chattels are concerned the £6000 consideration exemption applies to each of the joint owners, this link from the official HMRC guidance explains:

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg76573