Dozens of Olympic torches are up for sale on eBay. But what are the tax implications?
Torch carriers are allowed to buy the torch they carry (the flame is transferred from one torch to another as the torch relay continues) for £199 each as a memento, a discount on the reported £495 it costs to make the torch. But faced with a choice between mounting the torch above the mantelpiece and auctioning it off to benefit a favourite charity or the seller’s bank balance some enterprising carriers have unsurprisingly decided to put it up for sale.
What they may have missed though are the tax consequences. Capital gains tax could be due on the sale if it goes for more than £6,000. If the torch carrier sells it for personal gain they will at least have the proceeds in their bank account to pay their CGT. If they give the money to charity they could get a very nasty shock when they realise they could be liable for a bill of up to 28 per cent of the proceeds. Much more sensible would be to just give the torch to a charity, for them to sell on.
And then there is gift aid. Working out then how much to gift aid so as to minimise the tax bill is not straightforward. For a higher rate taxpayer the mechanics change – and they can potentially gift aid part, and end up with more IT relief than CGT due so they actually get a tax repayment (while the gift aid rules don’t limit it to £50k!). Basic rate taxpayers could also end up with an additional income tax liability,on top of the CGT if they give the proceeds under gift aid and the have not already paid enough tax to cover the charitable donation. Though in some cases the gift aid relief can reduce the CGT tax rate.
Paul Lewis, presenter of MoneyBox on Radio 4, has blogged in more detail on this topic, incorporating input from the CIOT’s Director, Technical, Tina Riches.
The moral of all of this? See a Chartered Tax Adviser (CTA) before you carry out a transaction!
CIOT External Relations Manager
Friday 25 May 2012