Clearly not as overworked as their lamentable post response times suggest, HMRC has found time to warn Olympic torchbearers that if they sell their torches at a profit they may be liable for capital gains tax (see link to Daily Telegraph website). However, in my view they are technically wrong to do so!
Eash of the 8,000 torchbearers is offered the opportunity to buy his or her torch for £215, and some have appeared on e-Bay and other websites, attracting bids of over £5,000. So what are the tax consequences of this?
HMRC’s view appears to be that the torches are chattels (which is almost certainly correct) as they refer to the £6,000 chattel exemption, but suggest that if a torch is sold for more than that (and at a gain, along with other gains for the year, in excess of the £10,600 annual capital gains exemption) taxpayers will have to pay capital gains tax.
They are, in my view, clearly wrong in this respect. On the agreed basis that the torches are chattels, we need to consider if they are ‘wasting chattels’, because such chattels are exempt from capital gains regardless of the level of sale proceeds or gain arising on their sale. In the case of tangible movable property, a wasting chattel is one with a useful life of less than 50 years, which is ineligible for capital allowances.
There is no chance that HMRC would stand for anyone trying to claim capital allowances on an Olympic torch holder; it is almost inconceivable that anyone could argue that they were using such an item for trading purposes, except as trading stock. I suppose the only possibility would be a business such as a hotel or pub using one for decorative purposes, but that is hardly of general application to all relevant taxpayers and torchbearers.
The torches are clearly tangible movable property; they are capable of being touched, and are indeed specifically designed to be held and to be mobile. So do they have a useful life in excess of 50 years? Do they hell as like. They are designed to be used over the course of the past 3 and the next 7 weeks for the specific purpose of holding the Olympic flame.
The idea that anyone would think it was a good idea in 50 years’ time to resurrect one of the holders for that purpose, and expect it to be up to the task, is frankly preposterous. And indeed, why would LOCOG bother to have them designed to have a 50 year useful life when they only need them for 2 to 3 months? Talk about over-engineering!
It is not very helpful to have HMRC issuing incorrect tax advice through the media, and it leads those of us with long memories to pine for the time when HMRC was a byword for technical tax excellence. This is yet another sign of the apparently terminal decline of a once great institution, and I for one am heartbroken to see it.