How are chattels treated for CGT?

Question

Accepted Answer

Here is a comprehensive summary of how chattels are treated for CGT purposes.

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## What the law says

**Definition**
A chattel for CGT purposes is **tangible movable property**. (Chattels that become permanently affixed to land become fixtures and merge with the land, ceasing to be treated as separate assets — see below.)

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**The £6,000 Chattel Exemption (TCGA 1992, s.262)**

- A gain on the disposal of tangible movable property is **not a chargeable gain** if the disposal consideration does **not exceed £6,000**.
- Where consideration **exceeds £6,000**, the chargeable gain is capped at **five-thirds of the excess** of the consideration over £6,000 (marginal relief).
- Where a chattel is **disposed of at a loss** and the consideration is less than £6,000, the consideration is **deemed to be £6,000** for loss purposes, thereby restricting the allowable loss.
- The s.262 exemption does **not apply** to disposals of commodities on a terminal market, or to disposals of currency.

**Sets of Chattels (TCGA 1992, s.262(4))**
Where two or more assets forming a **set** are disposed of by the same person to the same person (or connected/concerted persons), the transactions are treated as a **single transaction** disposing of a single asset, with the £6,000 threshold applied to the set as a whole.

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**Wasting Asset Chattels (TCGA 1992, s.45)**
A chattel that is also a **wasting asset** (i.e. tangible movable property with a predictable life of **50 years or less**) is **exempt from CGT** on disposal, *unless*:
1. The asset has been used solely for a trade/profession/vocation and capital allowances were or could have been claimed; or
2. Expenditure on the asset has otherwise qualified in full for capital allowances; or
3. TCGA 1992, s.45(3B) applies (where the asset is used as plant by another person).

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**Chattels vs. Fixtures**
Where a chattel is **permanently affixed to land**, it becomes a fixture and should not be treated as a separate CGT asset. It only becomes a chattel again at the point it is **physically detached** from the land.

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## HMRC guidance / practice

**Overview**
HMRC confirms that a gain on a chattel (tangible moveable property) will not be a chargeable gain if the disposal consideration is **£6,000 or less** (TCGA92/S262), and that disposals of wasting asset chattels are **exempt** unless capital allowances can be claimed or s.45(3B) applies.

**Practical effect**
Applying these rules, **no chargeable gain or allowable loss will normally arise on the disposal of ordinary household effects and furnishings**.

**Common non-wasting chattels disposed of for over £6,000** (where CGT may apply) include:
- Paintings and other works of art
- Antiques
- Furniture
- Non-sterling coins and banknotes
- Ornaments, jewellery, stamps, books, militaria, models and toys

**Wasting asset examples**
The most common wasting asset chattels involve **plant or machinery**. Some assets naturally have a predictable life not exceeding 50 years. For example:
- Antique **clocks and watches** are always regarded as wasting assets.
- Militaria **vehicles and guns** are always regarded as wasting assets.

**Sets of chattels**
HMRC takes the view that articles form a **set** only if they are essentially similar and complementary *and* their value taken together is greater than their total individual value. The fact that chattels are sold as one lot at auction or to the same person is not conclusive.

**Fixtures**
HMRC follows land law principles (e.g. *Elitestone Ltd v Morris*) in determining whether an item is a chattel or a fixture. The purpose of annexation is key — a dry stone wall, for example, is a fixture even though the stones merely rest on the land.

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