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Maihem

Buying Goods With Gold

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If I buy something (say a car) with gold sovereigns, how is taxation handled?

Do I have to take ID from the person selling the car as if they're buying the gold from me?

What other legal issues might there be?

What about changing sovereigns for halves and quarters like splitting a note? Is that taxable or require registration as a dealer?

Edited by Maihem

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If I buy something (say a car) with gold sovereigns, how is taxation handled?

Do I have to take ID from the person selling the car as if they're buying the gold from me?

What other legal issues might there be?

What about changing sovereigns for halves and quarters like splitting a note? Is that taxable or require registration as a dealer?

Is this a personal car or a business?

(There is no CGT on soverrreigns at present, but if you are a business you would be required to pay the relevant taxes at cash value of the transaction. HMRC are, theoretically, on top of this barter thing.)

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It would be private exchange/presonal if I were to do it. I'm just preparing for more of my peers to have sufficient personal coinage to trade goods in bullion coinage instead of sterling.

Are sovereigns treated like any other non-sterling currency? Or do I have to comply with gold dealership laws?

Edited by Maihem

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Is this a personal car or a business?

(There is no CGT on soverrreigns at present, but if you are a business you would be required to pay the relevant taxes at cash value of the transaction. HMRC are, theoretically, on top of this barter thing.)

I found on wikipedia that a sovereign is not subject to CGT because it always has a face value of £1. Does that mean taxes are due according to that?

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I found on wikipedia that a sovereign is not subject to CGT because it always has a face value of £1. Does that mean taxes are due according to that?

Yes, but it would have to be the nominal value of the transaction, and a seller would run the risk of being paid in sterling instead.

Would you sell me a sovereign for a pound?

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Yes, but it would have to be the nominal value of the transaction, and a seller would run the risk of being paid in sterling instead.

Would you sell me a sovereign for a pound?

A pound of what ? ;)

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Please note that this is just an opinion, you would have to get a final opinion from an accountant; however, you would need some form of reassurance that the person was who they said they were, as you are taking the risk with the quality of the car. Of course you wouldn't need ID for anything to do with the gold; it is up you both willing parties to transact a purchase in anything you wish.

However, the HMRC would treat all business transactions as transactions with a value (this is a guess based on previous judgements I have seen; the HMRC, rightly, wants to make sure that people didn't use barter loopholes to avoid taxation), so you'd have to agree the value of the transaction in sterling for tax purposes.

The CGT thing is quite clear and has been discussed many times at length. There is NO CGT on Sovereigns. Their value is the value of the gold content, less whatever you discussed with the buyer of your gold as a premium, in other words, how much he wanted to take gold off you instead of sterling. This is just a normal buyer/seller negotiation. So if, say, you both jointly valued your gold at £3000, being the agreed value of said horseless carriage, then the fact that you paid £300 for the Sovs originally is irrelevant to the deal.

As long as you were a private buyer exchanging a car for gold, then the car is worth what you are willing to pay for it, and the gold is worth however much of the car the seller is willing to give you. (Hence the value of gold as a currency, it is divisible!) You could accept "change" in whatever form you wanted. What you are proposing is just a form of barter, taken to another level.

No-one (apart from DVLA) would have to be informed, any more or less than you would do if the exchange took place in more conventional currency. You would not be a gold dealer any more than I am a currency trader when I pop into Sainsbury's.

Edited by Old Nis

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If I buy something (say a car) with gold sovereigns, how is taxation handled?

Do I have to take ID from the person selling the car as if they're buying the gold from me?

What other legal issues might there be?

What about changing sovereigns for halves and quarters like splitting a note? Is that taxable or require registration as a dealer?

I would sell you a car for sovs any day of the week.

A private transaction like that can be done in whatever is agreed. I could accept apples and chickens if I want to.

Any tax or legal implications would always rest with the seller but in this case, bartering, there are none.

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Richyc, I am not sure that you would be correct if the sale was done by way of trade, with a serious level of profit element involved; HMRC have a habit of casting beady eyes over this sort of thing if it is repeatedly done with a view to avoiding taxation. Remember the attempts to pay staff in gold in the City?

However, I must apologise to you for attempting split hairs on a subject in which I am admittedly unqualfied. The trade the OP illustrates is proposed as a private deal, anyway.

It also amuses me immensely to think of the taxman attempting to regulate an entire society that has started to conduct itself in this manner if TSHTF.

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Richyc, I am not sure that you would be correct if the sale was done by way of trade, with a serious level of profit element involved; HMRC have a habit of casting beady eyes over this sort of thing if it is repeatedly done with a view to avoiding taxation. Remember the attempts to pay staff in gold in the City?

However, I must apologise to you for attempting split hairs on a subject in which I am admittedly unqualfied. The trade the OP illustrates is proposed as a private deal, anyway.

It also amuses me immensely to think of the taxman attempting to regulate an entire society that has started to conduct itself in this manner if TSHTF.

would this mean that anyone selling a car privately is avoiding tax? am sure it probably does in the eyes of hmrc but how are they to know?

i remember having to do tax returns and them wanting to know about interest ammounts over £5 and additional incomes like car booty over £5. FFs £5, yeah right, like i even know about all that or am going to hang myself out for them.

Bartering does not produce profit though. Selling a car for £2k and taking 10 sovs as payment makes no profit. What if I take 1000 chickens as payment, what could they see as profit then or ask for as tax?

I know you were splitting hairs but real life?

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I would sell you a car for sovs any day of the week.

A private transaction like that can be done in whatever is agreed. I could accept apples and chickens if I want to.

Any tax or legal implications would always rest with the seller but in this case, bartering, there are none.

Should you be calling this case barter when the transaction involves money ?

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Should you be calling this case barter when the transaction involves money ?

I dont see why not. It is a trade for gold rather than money.

Sovs may have a £1 denomination but I bet you couldnt use one at a tesco till, not even as £1.

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I dont see why not. It is a trade for gold rather than money.

The 1971 Coinage Act suggests money.

Sovs may have a £1 denomination but I bet you couldnt use one at a tesco till, not even as £1.

If you had an unpaid £1 Tesco bill, and you offered a sovereign as payment then, legally, Tesco could not refuse it. (Unless they wanted to cancel the debt, of course).

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The 1971 Coinage Act suggests money.

I know that but the reality is that this is gold.

You can not hide cash from HMRC or anyone else by converting it into sovs with an alleged face value of £1. If I asked my boss to pay me with 25 sovs each month then I would not get away with paying no tax to HMRC by claiming that I only get paid £25.

If you had an unpaid £1 Tesco bill, and you offered a sovereign as payment then, legally, Tesco could not refuse it. (Unless they wanted to cancel the debt, of course).

Stamps are legal tender aswell but have you ever tried to pay a bus driver with stamps or use them in the green grocer?

What I was getting at is that sovs are gold rather than money, rather than circulating money. I dont think the average till attendant in tesco would know what a sov was and would not accept it as payment for your shopping. They would not accept is as having a value of £200 nor £1. Do not forget that a sov has denomination marked on it so people that know nothing of them would not know of their theoretical denomination.

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I know that but the reality is that this is gold.

You can not hide cash from HMRC or anyone else by converting it into sovs with an alleged face value of £1. If I asked my boss to pay me with 25 sovs each month then I would not get away with paying no tax to HMRC by claiming that I only get paid £25.

If HMRC send you a tax bill for £1000 (which you accept as correct) and you post them 10 sovereigns what would be the result ? Would you still owe, be in credit or would the tax debt be cancelled ?

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If HMRC send you a tax bill for £1000 (which you accept as correct) and you post them 10 sovereigns what would be the result ? Would you still owe, be in credit or would the tax debt be cancelled ?

I don't know but am guessing that they wouldn't take them.

I know that for tax purposes you could not be paid in sovs and claim your income as the total of their face value. They regard that as tax evasion because gold is considered an asset and not cash.

Like I have been saying, gold is not money and sovs, although being technically legal tender, are not money.

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would this mean that anyone selling a car privately is avoiding tax? am sure it probably does in the eyes of hmrc but how are they to know?

i remember having to do tax returns and them wanting to know about interest ammounts over £5 and additional incomes like car booty over £5. FFs £5, yeah right, like i even know about all that or am going to hang myself out for them.

Bartering does not produce profit though. Selling a car for £2k and taking 10 sovs as payment makes no profit. What if I take 1000 chickens as payment, what could they see as profit then or ask for as tax?

I know you were splitting hairs but real life?

The HMRC wish to know of all activities you conduct in this country (or outside it, if you are resident in the UK for tax purposes) which yield a profit. All income is technically taxable, with the sole exception of some benefits, some interest on savings (such as ISAs) and the first £4250 of rent-a-room rental income.

So the sale of an old second-hand car would not be of interest to the Redcoats, as you would have sold it at a loss. If you were a dealer (or indeed, anyone) this loss could be offset against tax due as a result of your other sales which made a profit. However, you would then need to complete your own tax return for the rest of your working life, instead of just letting your pay department talk to the HMRC on your behalf. I believe this is normal in the USA, but in the UK, most people can't be bothered; if you are employed rather than self-employed, the opportunities and allowances are almost always trivial.

Some very enlightened employers (WH Smith used to be one, and I believe still is) will actually negotiate with the HMRC on behalf of their employees to make a claim against employed income in respect of some minor expense, and give this reclaimed tax to their staff. An example of this might be a builder who sold steel-toecapped boots to all employees, and if the boots were a condition of working at that establishment, then the cost of the boots could be set against taxable employed income. I have forgotten what WH Smith claimed for, but I remember them being thoroughly honourable in doing this for the staff, but very little can be set against employed income, so most people don't bother.

In practice, unless the profit on a sale is formally notified to the Revenue men, HMRC are unlikely to know about it. While they might not know about it, they will always pursue matters where they are informed of the transaction. I have heard of many, many cases of incentives given by a Company as a sales inducement being found out, added up and taxed; even if the voucher was £25 as a one-off gift. These are still benefits from your employer and any similar income would attract the same interest.

So the fact that the transaction is unknown to the HMRC does not alter the case that tax is payable. It just means you have been lucky to get away with an illegal act, like using your mobile on a dark motorway at night while travelling at 75 mph.

So the answer to your question is that this barter example has produced no profit and therefore no tax is payable; however, other trades may indeed generate income, and any profit would be taxable.

I welcome any comments by those suitably qualified, but as a partially self-employed person myself, I believe I have stated the matter correctly.

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Old Nis

I think you are mixing two types of tax, namely income and capital gains. Income involves being gainfully employed and/or trading, and capital gains involves the disposal/sale of assets. There are a number of exceptions to the latter (your car being one such exception)

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Old Nis

I think you are mixing two types of tax, namely income and capital gains. Income involves being gainfully employed and/or trading, and capital gains involves the disposal/sale of assets. There are a number of exceptions to the latter (your car being one such exception)

Thank you for correcting me on that point. I was attempting to show the income tax element of the trade, and you rightly have pointed out what I left out, that a vehicle would be written-down as a capital asset in stages, rather than being treated as a consumable. I was concentrating too much on the gold=cash concept and forgot the finer points of the taxation side of the discussion; perhaps this complicates the discussion too much, but that does not negate the validity of your post.

The HMRC would be uninterested, completely uninterested, in accepting gold in any form as payment of tax as they are only interested in the FRN equivalent. If you insisted, they might accept a sovereign as equivalent to £1 per coin, but that gets us nowhere, as you would not make such an offer. Just as a corn merchant pays his taxes in paper currency, so would we all have to do so.

Although the state may refuse to accept gold, I can very easily see the day coming when a private dealer would accept it. There are already many places in the US where gold is taken as payment for goods, even if the rate of exchange is currently a bit shark-like. Merchants in the gold-rush era made their fortunes in selling shovels and food for gold dust, rather than by mining it themselves.

The biggest barrier to such trades is the utter ignorance of the public in such matters. We have seen many posters on this forum make remarks about the person on YouTube offering a gold maple for fifty dollars and being turned down. Nobody ever was stupid enough to make me such an offer, dammit. He would be lucky to keep his fingers as I stuffed the notes into his palm.

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Thank you for correcting me on that point. I was attempting to show the income tax element of the trade, and you rightly have pointed out what I left out, that a vehicle would be written-down as a capital asset in stages, rather than being treated as a consumable. I was concentrating too much on the gold=cash concept and forgot the finer points of the taxation side of the discussion; perhaps this complicates the discussion too much, but that does not negate the validity of your post.

The HMRC would be uninterested, completely uninterested, in accepting gold in any form as payment of tax as they are only interested in the FRN equivalent. If you insisted, they might accept a sovereign as equivalent to £1 per coin, but that gets us nowhere, as you would not make such an offer. Just as a corn merchant pays his taxes in paper currency, so would we all have to do so.

Am not certain that you could insist on HMRC accepting a sov as £1 but am sure that it is far more likely that they would accept this side of the argument than the other.

I mentioned earlier that if I chose to have my employer pay me in sovs that I could not avoid paying tax by claiming that I earn £20 a month whilst taking home 20 sovs. In this instance gold is considered a valuable asset by HMRC, not cash, but being sovs they are CGT free.

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I know that but the reality is that this is gold.

You can not hide cash from HMRC or anyone else by converting it into sovs with an alleged face value of £1. If I asked my boss to pay me with 25 sovs each month then I would not get away with paying no tax to HMRC by claiming that I only get paid £25.

Stamps are legal tender aswell but have you ever tried to pay a bus driver with stamps or use them in the green grocer?

What I was getting at is that sovs are gold rather than money, rather than circulating money. I dont think the average till attendant in tesco would know what a sov was and would not accept it as payment for your shopping. They would not accept is as having a value of £200 nor £1. Do not forget that a sov has denomination marked on it so people that know nothing of them would not know of their theoretical denomination.

I personally prefer the £5 proofs for storing value in a convenient size, that said at £1400 a pop from the Royal Mint these days they don't represent good value in terms of the base metal at they are about 40% overpriced - though you get nice presentation etc that does add above the base metal content.  They are 39.94g of 22 Carat Gold, a 1oz Maple only costs £900 about 10% premium.

Edited by Mikhail Liebenstein

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