Chapter 15 Chattels Flashcards
chattels
Chattel means tangible moveable property, they include paintings, racehorses and computers.
Wasting chattels – this is a chattel with a predictable useful life not exceeding 50 years. These also include racehorses, computers, short lasting plant and machinery, clocks and watches. Wasting chattels are exempt from CGT. The one instance where chattels are not regarded as exempt is when they are used in a trade and capital allowances have been or could have been claimed.
Non-wasting chattels: proceeds less than £6,000 – if a non-wasting chattel is sold and the proceeds are equal to or less than £6,000 any resulting capital gain is exempt from CGT.
Non-wasting chattels: Loss with proceeds less than £6,000 – to calculate the loss for CGT purposes, the rules assume that the taxpayer has sold the non-wasting chattel for exactly £6,000 (even if the item is sold for less). This finds out the allowable capital loss, which can be set against other gains in the year of carried forward. This rule cannot turn a loss into a gain, however.
Non-wasting chattels: the 5/3rd rule – this applies if a non-wasting chattel is sold, disposal proceeds exceed £6,000 but the original acquisition cost was less than £6,000. We first calculate the chargeable gain in the normal way. However, this gain cannot exceed the gain using the formula:
5/3 x (gross proceeds - £6,000). You go for the lower of these two methods.
Gains on plant and machinery – taxpayers can claim capital allowances on the cost of plant and machinery. Plant and machinery are regarded as having a useful life of less than 50 years, so are wasting chattels. Where a taxpayer makes a gain on an asset on which capital allowances were claimed, the gain is chargeable for CGT purposes, despite wasting chattels being exempt. If they make a loss that loss will not be allowable for capital gains tax purposes.
