Would The Gains On a Classic Car Sale Be Taxed?Written on August 29, 2018 by Kirk Rice LLP
The Question:
I have owned an E-Type Jaguar for many years, which I use for high days and holidays. The car is in good condition and is worth a lot of money and far more than I paid for it. I am considering selling it but I am concerned that I will get a large tax bill on the gain. What is the tax position on selling a classic car?
Kirk Rice LLP answers:
A classic cars within a category of assets known as ‘wasting assets’ and the good news is that personal property which is a wasting asset is entirely exempt from capital gains tax. There is one major exception to this and that is where the car has been used for the purposes of a business and tax allowances have, or could have been, claimed on it. In that instance the exemption would not apply and tax would be due on sale. You mention that you have only used the car for ‘high days and holidays’ and so I assume the classic car has been wholly a private asset and therefore tax will not be payable.
The exemption applies to all motor vehicles which were constructed, or have been adapted, to carry passengers unless it is a type not normally used as a private vehicle and is unsuited for such use. Normal motor cars are, therefore, exempt from Capital Gains Tax (CGT). This includes vintage cars of this type. The types of cars not included in this exemption are;
- taxi cabs
- racing cars
- single seat sports cars
- vans, lorries or other commercial vehicles
- motor cycles, scooters or motor cycle/sidecar combinations
However, if a motor vehicle is not CGT-exempt as a passenger car it is nonetheless regarded as ‘machinery’ for CGT purposes and is, therefore, treated as a wasting asset under the ‘machinery’ exemptions. Again a disposal of such a vehicle will only give rise to a chargeable gain where tax allowances were, or could have been, claimed as part of a business use.
It should be noted that if a reader decides to start buying and selling vintage cars to take advantage of these rules then such a plan would not work. That is because anyone who buys, say, a vintage car with the plan to re-sell it at a profit they would be considered to be trading i.e. running a business and the profits arising would be taxable under income tax rules!
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Any reader interested in discussing the tax implications of selling a classic car can telephone Graham Jennings on 01344 875 000 or email info@kirkrice.co.uk
Please note: answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made. The FCA does not regulate tax and trust advice.
Correct as of 29 August 2018
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