Classic Car Investment

[Lambs]

Dear All,

A company has been set up to hold an expensive car, which it is hoped will prove to be a 'classic' in years to come. It is being maintained, insured, etc., but from what I can gather, there is no intention to derive income from the car - it will not be hired out, for example. I understand that the company owners hope to sell the car at a gain, in several years' time. The company has no other purpose.

To me, and in terms of administration, this is clearly not a trade but arguably a company with investment business. I am not sure I can rustle up enthusiasm for the idea that it is 'actively managing its investments' and I am inclined to think that the costs of maintaining the asset itself are not deductible management expenses.

I think that the car's ultimate disposal will be a corporate capital gain. Cars are generally exempt as wasting assets but with the proviso that Capital Allowances have not, and could not have, been claimed. In this case, I do no think that the asset is being used for a qualifying activity. I realise that managing investments can be a qualifying activity in its own right for the purposes of CAs but I should argue that this would extend to premises, office equipment, etc., used for managing the company's investment assets, rather than the investment assets themselves.

I should be grateful for your perspective(s). I am not sure why it was decided to hold the car in a company, although it does occur to me that there is perhaps a marketing / commercial aspect - "own some shares in a classic car" would probably be easier than, say, "buy the passenger-door wing mirror".

Kind regards,

Lambs

[AnthonyR]

Agreed that unless they are going to be buying and selling regularly then it's likely that it's going to be an investment business, so the costs of upkeep are unlikely to be tax deductible.

Sounds to me like they've bought the car hoping to get the ongoing costs as a tax deduction while they make sure the engine is properly maintained by running the car around the block on a regular basis (obviously they can't just leave it in the garage.. things might freeze up!).

The next question is whether there is likely to be a benefit in kind on any use by the owners.

Frankly they would have been better off buying it personally, in which case it would have likely been CGT exempt and with no risk of BIK.

[Lambs]

Many thanks, A

Any thoughts on the Capital Allowances / CGT exemption / wasting asset aspect?

Lambs