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UK Clarifies Tax Position Of Olympic Torch Sales

by Robert Lee,, London

07 June 2012

HM Revenue and Customs (HMRC) has issued a bulletin detailing the potential tax consequences that may be incurred from the sale of an Olympic Torch.

During the course of the UK's Olympic Torch relay, 8,000 Torchbearers will carry individual torches. The Torchbearers were offered the opportunity to purchase their torch at a reduced rate. However, within days of the first stage of the relay, torches were being sold online, with some auctioned for charity. HMRC has now clarified the cases in which tax may be charged on the sale of a torch.

If a torch is given to a charity for them to keep or sell themselves, the Torchbearer will not be charged capital gains tax (CGT). If a torch is sold and the proceeds donated to a charity through the Gift Aid system, a CGT charge may be incurred, depending on the amount received. For every GBP100 (USD154) donated, the charity can reclaim GBP25 from HMRC. For the donation to be valid under Gift Aid, the seller will need to pay enough Income Tax or CGT in the tax year to cover the amount of tax the charity will reclaim on the gift.

For those not donating to charity, if the torch is worth less than GBP6,000 when sold, the seller will not have to pay CGT on the proceeds. If sold for more than GBP6,000, the seller will be deemed to have a chargeable gain. They may therefore have to pay CGT, depending on whether they have other gains in the tax year. If the seller is CGT liable, the rate charged will be either 18% or 28%, depending on their total income for the year.

HMRC has also stressed that sellers should bear in mind the possibility that selling a torch could be considered a trade, or part thereof. In this case, the seller would be liable to income tax rather than CGT. If an individual regularly sells goods or services, they are more likely to be considered to be trading, and thus liable to income tax on their trading profits.

TAGS: capital gains tax (CGT) | tax | United Kingdom | internet | sportsmen | individual income tax

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