I was chatting to a friend of mine who is very fond of cars and motor bikes; his (expensive!) hobby is to purchase collectible cars and motor bikes as investments because he claims that he can make a fortune on them over the years. I'm not really into cars so I just believe him. Hehehe...
However he got me thinking about capital gains implications (I know... I know... he's talking enjoyable hobby and here I am thinking about capital gains... ).
I know that private motor cars are exempt from capital gains tax, however I checked the HMRC web site and I could not find a clear definition of what is considered a 'private motor car'. Is it any car that is owned personally (no business use whatsoever) or is there any requirement about the number of cars and the cars being driven regularly?
My friend's cars are all collectible and they are not for everyday driving. I'm not sure if they would be considered 'private motor cars' (therefore exempt from capital gains tax) or if they would be considered as collectible items (same as paintings or antiques) and therefore subject to capital gains tax in the normal way since both the purchase price and hopefully the future sale price are above £6,000.
Same question about the motor bikes. I believe they would not qualify for 'private motor car' exemption to CGT as they are not strictly cars, even though their use is the same as the cars mentioned above.
Has anyone got any experience in this field as I'm really curious to understand to what extent the 'private motor car' exemption applies?
Thank you.
Fabs
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My take on this is that if the cars/ bikes are individually worth more than £6000 then there are CGT implications but only on the profit made.
I would say that HMRC would view a personal car, as the vehicle(s) that are used regularly for day to day transport. Not vehicles specifically bought as an investment, and only driven/ ridden occassionally
Looks like you have already seen this page of the HMRC guide but I will put it up for others to have a look at.
In your post you mention that the cars are not for everyday driving and your friend has done this multiple times, I think it's possible that HMRC could argue it's actually a trade and subject to Income Tax and NI. The caveat is, I'm not an expert here but it's a nagging thought from old tax studies.
It seems to fit my scenarios perfectly, but I'm not sure "This is Money" is exactly an authoritative source for this type of information. I had a good laugh anyway.
It sounds like the collectible cars qualify for private motor car exemption for CGT purposes.
Fabs
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