Gold is one of the few assets where the tax answer depends on the shape it is in. Investment gold is exempt from VAT. Sovereigns minted in 1837 or later and Britannia coins are sterling currency and so exempt from capital gains tax. A Krugerrand of identical weight is a chargeable asset. The metal is the same; the tax is not.
VAT: the investment gold exemption
Supplies of investment gold are exempt from VAT. The definition is precise, and something that misses it by a fraction is standard-rated.
Bars and wafers. Gold of a purity not less than 995 thousandths, in the form of a bar or wafer, of a weight accepted by the bullion markets.
Coins. Gold coins minted after 1800, of a purity of at least 900 thousandths, that are or have been legal tender in their country of origin, and are of a description normally sold at a price not exceeding 180% of the open market value of the gold they contain.
The 180% test is what separates bullion from numismatics. A coin trading far above its metal value because it is rare is being bought as a collectible, and it falls outside the exemption.
Exemption is not always welcome, because it blocks input tax recovery. Producers and transformers of gold, and businesses supplying gold for industrial purposes, may opt to tax supplies to other registered traders, with prior notification to HMRC, in order to recover input tax.
The dealer obligations people miss
The exemption comes with an anti-money-laundering compliance package attached, and it bites at low values:
- Notification. Required on a first exempt supply exceeding £5,000, or where supplies to one customer exceed £10,000 in any 12-month period;
- Invoices. Mandatory for transactions above £5,000, or cumulative supplies above £10,000 in the last 12 months;
- Customer records. Identification documents must be obtained and customer information kept for six years;
- Penalties. Up to 17.5% of the value of the transactions for non-compliance.
A penalty geared to transaction value rather than to tax lost is unusual and severe. On gold, where margins are thin and turnover is high, 17.5% of value can exceed a year's profit.
Capital gains: currency versus chargeable asset
HMRC's position is that "sovereigns minted in 1837 and later years and Britannia gold coins are currency but, like all sterling currency, are exempt". They are legal tender in the UK, and sterling currency is not a chargeable asset.
Everything else divides into two.
Non-sterling currency coins are chargeable. Krugerrands are the standard example. They are currency, but not sterling currency, so a gain on disposal is within the charge to capital gains tax in the ordinary way.
Coins that are not legal tender are chattels. Pre-1837 sovereigns fall here. They are tangible moveable property, so the chattels exemption in section 262 of TCGA 1992 applies: no chargeable gain arises where the consideration for the disposal does not exceed £6,000, and where it does, the chargeable gain is limited to five-thirds of the excess over £6,000. The exemption does not extend to coins that are non-sterling currency.
Bullion bars are chargeable assets. They are not currency and they are not, realistically, within the chattels limits.
What this means for an investor
The practical effect is that the packaging of a gold holding determines the tax on its growth. Hold £100,000 of gold as Britannias and a subsequent gain is outside capital gains tax entirely. Hold the same value in bars or Krugerrands and the gain is taxable in the usual way, against the annual exempt amount and at the prevailing rates.
Three cautions, because this is an area where enthusiasm outruns the rules.
The CGT exemption is about legal tender status, not about gold. It applies because the coin is sterling currency. It says nothing about income, about VAT, or about inheritance tax — a holding of Britannias forms part of the estate on death like anything else. Our guide to family wealth planning covers that side.
Dealing is not investing. Someone buying and selling coins as a trade is taxed on trading profits, and the currency point does not rescue them. Frequency, organisation and finance all bear on which side of the line an activity sits.
Premiums are a real cost. Coins that qualify as sterling currency usually trade at a premium to spot. A tax exemption obtained by paying several per cent over the metal price is not free, and the comparison to make is after both tax and spread, over a realistic holding period.
Records to keep
Keep the purchase invoices showing the exact coin type, year and quantity, because the tax analysis turns on facts that a bank statement will not evidence. For mixed holdings, track acquisitions by type rather than by total value spent. And if you deal at any scale, treat the notification and record-keeping thresholds as operational triggers rather than as guidance.
Acumon advises on investment assets and their reporting through capital gains tax, private client tax and VAT compliance work, with inheritance tax planning where the holding is part of an estate. If you are buying gold partly for the tax treatment, decide the coin before you decide the amount.