A client bought a watch some years ago for £5,000 and it is now worth in the region of £25,000. Will the chattels exemption from capital gains tax apply to a disposal?
The chattels exemption can apply to disposals of tangible moveable property for £6,000 or less. If the consideration exceeds £6,000 the chargeable gain is restricted to five-thirds of the excess. These rules will not assist the client.
However, a gain from tangible moveable property which is a wasting asset is completely exempt from capital gains tax irrespective of the level of sales consideration. Plant and machinery is a wasting asset and HMRC accept that a watch is classified as machinery so your client’s capital gain will be completely exempt. This does of course assume the disposal is in fact a capital disposal and your client is not carrying on trading activities.