ACCA TX ^UK Syllabus C. Chargable Gains For Individuals - Chattels and wasting assets - Notes ^{1 / 2}

Chattels

A chattel is a piece of tangible, movable property (something that you can touch and move). 

Your personal possessions will normally be chattels. 

For example, items of household furniture, paintings, items of plant and machinery fixed to a building. 

Some chattels are exempt and some are chargeable to capital gains tax.

• A wasting chattel is exempt from capital gains tax. 

  A wasting chattel is one with a life of 50 years or less.  

  For example, racehorses, boats.

Exception to the exemption of wasting chattels:

Plant and machinery (with a life of less than 50 years) on which capital allowances have been claimed are treated as non wasting chattels. 

A capital gain needs to be calculated on their disposal, but a capital loss will not be allowable on their disposal.

• It is possible that they are exempt under the non-wasting chattel exemption (being bought and sold for less than or equal to £6,000).

Non wasting chattels:

Non wasting chattels with a life of more than 50 years are chargeable to capital gains tax in the usual way.

However, if both the proceeds and the cost are less than £6,000, the chattel will be exempt from capital gains tax
.
Note: the detailed calculations for chattels where the cost or proceeds are less than £6,000 are not examinable in ATX.

Non wasting chattel capital gains calculation:

Illustration:

Maria sold the following assets in December:

1. An antique table which had cost £3,000 and was sold for £5,000

2. A painting which had cost £2,000 and was sold for £10,000

3. An antique vase which had cost £8,000 and was sold for £3,000

4. A set of china which had cost £7,000 and was sold for £8,000.

Solution:

1. The table is exempt as it was bought and sold for less than £6,000

2. The painting:

   Proceeds £10,000

   Cost (£2,000)

   Capital gain £8,000

   Maximum gain assessable = 5/3*(£10,000-£6,000) = £6,667

3. The vase:

   Deemed proceeds £6,000

   Cost (£8,000)

   Capital loss (£2,000)

   The proceeds are deemed to be £6,000 as it was bought for more than £6,000 and sold for less than £6,000.

4. The china:

   Proceeds £8,000

   Cost (£7,000)

   Capital gain £1,000

   This is the normal calculation as the set of china had been bought and sold for more than £6,000.