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sleepwello'nights

Gold And Silver Coins As Currency

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I'm trying to find a definitive opinion on whether a transaction would be taxed on the face value of gold or silver legal tender in the UK rather than the current market value of the metal in the coins.

I came across this link when googling.

"Notice 2010-33

Frivolous Positions

Positions that are the same as or similar to the following are frivolous.

(13) In a transaction using gold and silver coins, the value of the coins is excluded from income or the amount realized in the transaction is the face value of the coins and not their fair market value for purposes of determining taxable income."

The US have legislation that prevents the gold and silver coins being taxed at their face value when used. It brings up a couple of questions in my mind. What if someone mistakenly purchased something for one dollar using a one dollar silver eagle. Would the recipient be taxed on the market value of the coin when it was obviously used for its face value, always assuming the unlikely probability that somehow the IRS got to know.

My main question is whether the same situation exists in the UK? If so what legal precedents or legislation gives rise to the rule?

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Open the link I supplied and you will see references to the relevant legislation.

Any answers to my question?

My main question is whether the same situation exists in the UK? If so what legal precedents or legislation gives rise to the rule?

My answer would be a very general yes based on the Income Tax (Earnings and Pensions) Act 2003.

However that answer would be applicable to a scenario that was the same as or similar to the a transaction using gold and silver coins, the value of the coins is excluded from income or the amount realized in the transaction is the face value of the coins and not their fair market value for purposes of determining taxable income example given.

Other scenarios may differ in the application of the rules, such as if someone mistakenly purchased something for one dollar using a one dollar silver eagle.

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Part 3

Part 3 Employment Income: earning and benefits etc. treated as earnings.

This comprises of 12 chapters with provisions 62 - 226. It defines what earnings are and various benefits in kind. I can't see any provision that defines whether gold or silver coins are to be valued at face value or market value.

The closest provisions are 701 and 702 which define asset and readily convertible asset. Neither of these provisions makes any mention of whether gold or silver UK legal tender coins are to be valued at face value or market value.

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Part 3 Employment Income: earning and benefits etc. treated as earnings.

This comprises of 12 chapters with provisions 62 - 226. It defines what earnings are and various benefits in kind. I can't see any provision that defines whether gold or silver coins are to be valued at face value or market value.

The closest provisions are 701 and 702 which define asset and readily convertible asset. Neither of these provisions makes any mention of whether gold or silver UK legal tender coins are to be valued at face value or market value.

I did ask you previously which specific US legislation you were claiming prevents the gold and silver coins being taxed at their face value when used

You pointed at your original link but as far as I could determine the legislation in your link does not prevent the gold and silver coins being taxed at their face value when used. Perhaps your sentence was incomplete ?

Legal determinations are as much about the facts of the events as any relevant legislation.

Furthermore legislation is sometimes akin to deciphering the da vinci code. I have often found this old line helpful :

(For precept must be upon precept, precept upon precept; line upon line, line upon line; here a little, and there a little).

FWIW I would contend that provision 62 is the only relevant one for your initial example (i.e. frivolous example(13) )

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I'm trying to find a definitive opinion on whether a transaction would be taxed on the face value of gold or silver legal tender in the UK rather than the current market value of the metal in the coins.

I came across this link when googling.

"Notice 2010-33

Frivolous Positions

Positions that are the same as or similar to the following are frivolous.

(13) In a transaction using gold and silver coins, the value of the coins is excluded from income or the amount realized in the transaction is the face value of the coins and not their fair market value for purposes of determining taxable income."

The US have legislation that prevents the gold and silver coins being taxed at their face value when used. It brings up a couple of questions in my mind. What if someone mistakenly purchased something for one dollar using a one dollar silver eagle. Would the recipient be taxed on the market value of the coin when it was obviously used for its face value, always assuming the unlikely probability that somehow the IRS got to know.

My main question is whether the same situation exists in the UK? If so what legal precedents or legislation gives rise to the rule?

You will be taxed on either the face value the coins or the gold price, which ever is highest. Imho.

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I did ask you previously which specific US legislation you were claiming prevents the gold and silver coins being taxed at their face value when used

You pointed at your original link but as far as I could determine the legislation in your link does not prevent the gold and silver coins being taxed at their face value when used. Perhaps your sentence was incomplete ?

Quite.

Paragraph 13 in the IRS notice provides that if a claim is made that the value of a transaction is the face value of the gold coins and "not their fair market value for purposes of determining taxable income, then the claim is frivolous and subject to a penalty for a frivolous tax return under section 6702(a) of Internal Revenue Code and the penalty for a “specified frivolous submission” under section 6702(B). Persons who file a purported return of tax, including an original or amended return, based on one or more of these positions are subject to a penalty of $5,000 if the purported return of tax does not contain information on which the substantial correctness of the self-assessed determination of tax may be judged or contains information that on its face indicates the self-assessed determination of tax is substantially incorrect."

By implication the attempt to use a gold or silver coin for a transaction at its face value lays the acceptor open to prosecution unless he reports the transaction in his tax return at the fair market value of the legal tender coin accepted.

The legislation may be convoluted but its purpose is quite clear. To tax the recipient on the fair market value of the precious metal content of the coin.

My question is: is there a similar provision in English law? The Income Tax (Earnings and Pensions) Act 2003 does not contain any such provision.

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You will be taxed on either the face value the coins or the gold price, which ever is highest. Imho.

I'm sure we will. I'm curious as to what precedent or statute gives HMRC the power to do so.

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Paragraph 13 in the IRS notice provides that if a claim is made that the value of a transaction is the face value of the gold coins and "not their fair market value for purposes of determining taxable income, then the claim is frivolous

Paragraph 13 states

(13) In a transaction using gold and silver coins, the value of the coins is excluded from income or the amount realized in the transaction is the face value of the coins and not their fair market value for purposes of determining taxable income.

That is not synonymous with what you have said paragraph 13 says.

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My question is: is there a similar provision in English law? The Income Tax (Earnings and Pensions) Act 2003 does not contain any such provision.

May I suggest once again that provision 62 of The Income Tax (Earnings and Pensions) Act 2003 does just that IF the situation is as per paragraph 13 of the IRS code mentioned earlier ?

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May I suggest once again that provision 62 of The Income Tax (Earnings and Pensions) Act 2003 does just that IF the situation is as per paragraph 13 of the IRS code mentioned earlier ?

"62Earnings

(1)This section explains what is meant by “earnings” in the employment income Parts.

(2)In those Parts “earnings”, in relation to an employment, means—

(a)any salary, wages or fee,

(b)any gratuity or other profit or incidental benefit of any kind obtained by the employee if it is money or money’s worth, or

©anything else that constitutes an emolument of the employment.

(3)For the purposes of subsection (2) “money’s worth” means something that is—

(a)of direct monetary value to the employee, or

(b)capable of being converted into money or something of direct monetary value to the employee.

(4)Subsection (1) does not affect the operation of statutory provisions that provide for amounts to be treated as earnings (and see section 721(7))."

I can't see anything there that relates to whether the value of gold or silver legal tender UK coins is their face value or fair market value.

Edited by sleepwello'nights

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"62Earnings

(1)This section explains what is meant by “earnings” in the employment income Parts.

(2)In those Parts “earnings”, in relation to an employment, means—

(a)any salary, wages or fee,

(b)any gratuity or other profit or incidental benefit of any kind obtained by the employee if it is money or money’s worth, or

©anything else that constitutes an emolument of the employment.

(3)For the purposes of subsection (2) “money’s worth” means something that is—

(a)of direct monetary value to the employee, or

(b)capable of being converted into money or something of direct monetary value to the employee.

(4)Subsection (1) does not affect the operation of statutory provisions that provide for amounts to be treated as earnings (and see section 721(7))."

I can't see anything there that relates to whether the value of gold or silver legal tender UK coins is their face value or fair market value.

I am sure you have heard it said that actions speak louder than words.

What if the actions, or lack thereof, were the focus of your attention ?

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i've just bought about 70 ounces from the guernsey mint ...if i get taxed i will be "taking it further"

as far as i can see it, im buying a legal currency from Canada (maples) that cant be taxed

if a walked into the post office and bought euros tomorrow i wouldn't be taxed ...because they

cant tax a currency ..........i'm going to fight this one !!!!!!!!! :o)

if i was buying silver bars fair enough... but im not im buying Canadian dollars !

If you were to be taxed would it be on the face value or the fair market value?

Any pointers to relevant case law or legislation would be appreciated.

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If you were to be taxed would it be on the face value or the fair market value?

Any pointers to relevant case law or legislation would be appreciated.

Any potential* tax liability of onis_uk would be, according to the facts he has presented, by way of Capital Gains Tax.

Canadian Maples are classified as chattels.

* Silver becoming an excessive three figure sterling valuation, a minimum element of that potential liability.

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Any potential* tax liability of onis_uk would be, according to the facts he has presented, by way of Capital Gains Tax.

Canadian Maples are classified as chattels.

* Silver becoming an excessive three figure sterling valuation, a minimum element of that potential liability.

Thanks, I know the facts and outline them below:

It is important to recognise currency as a chargeable asset in its own right and to deal with it accordingly. In terms of Capital Gains Tax legislation, currency including gold coins come under the section of 'Chattels and assets' and are generally subject to pre-designated gains limits for each year. Currency other than sterling is considered a chargeable asset. If anybody was considering claiming gold coins should not technically be classed as currency then the CGT manual also informs us that 'Coins which are currency but not sterling, for example Krugerrands, are chargeable assets.

Sovereigns minted in 1837 and later years and Britannia gold coins are currency but, like all sterling currency, are exempt because of TCGA92/S21 (1)(B).

However my specific question remains unanswered regarding whether Sovereigns or Britannias are valued at face value or fair market value.

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However my specific question remains unanswered regarding whether Sovereigns or Britannias are valued at face value or fair market value.

I think that would also depend on the facts, as presented, as I have previously said.

(I suspect you may think my reply is somewhat facetious but that is not the case).

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