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British investors scramble for gold coins to beat tax increase
By Javier Blas and Vanessa Houlder
Financial Times, London
Friday, May 28, 2010
http://www.ft.com/cms/s/0/74825c32-6a93-11df-b282-00144feab49a.html
British investors are scrambling to buy sovereigns and Britannia gold coins in an attempt to use a tax loophole to avoid paying more capital gains tax.
Mark O'Byrne, of Gold Core, a London-based gold coins and small bars dealer, said it was selling sovereigns and Britannias "in the thousands."
"This week we sold more than in any other one-week period," he said. "The vast majority of the buying is related to capital gains tax."
The move comes as the government plans to raise CGT for items such as second homes and shares to rates "similar or close to those applied to income," suggesting a rise from the current 18 per cent rate to nearer 40 or 50 per cent. The tax increase is likely to come into force next April but could be introduced on June 22 alongside the government's planned emergency budget.
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UK-minted bullion coins are exempt from CGT as they are considered legal tender. Some investors are choosing to buy gold coins instead of other assets that would incur CGT.
Revenue & Customs says "sovereigns minted in 1837 and later years and Britannia gold coins are currency but, like all sterling currency, are exempt." Coins that are currency but not sterling, such as South African krugerrands, are subject to CGT, the Revenue says.
Dealers said the rush by UK-based investors had pushed the premium of both coins above the spot gold price to about 7-8 per cent, up from 3.5 per cent at the beginning of May.
Spot gold in London traded on Friday at $1,215 a troy ounce, just below the nominal all-time high of $1,248.95 set this month.
The proposal to raise CGT was a concession to the Liberal Democrats after the Conservatives fell short of an overall majority in this month's general election.
The plan has met with opposition from the Tory right. The Con-Lib coalition believes it will curb tax avoidance by people treating income as capital gains and will raise money to help fund a rise in income tax thresholds for low and middle earners.
Other countries have seen a rush into gold coins this month. After the E750 billion (L638 billion) eurozone bailout, German investors bought the most coins since the collapse of Lehman Brothers in 2008. The US Mint, which produces one the most popular gold coins, has sold 184,000 one-ounce American Eagles so far this month, the most since January 1999.
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