- Tax Breaks for Older Cars - Is Vintage the Best Look?
- July 10, 2013
- Law Firm: Withers Bergman LLP/Withers LLP - New Haven Office
If you are thinking of buying a new car this year, you might consider going for a classic. Any dealership will tell you that ordinary cars for private use are capital gains tax exempt because of their status as ‘wasting assets’. This means that they are not expected to have a useful life beyond 50 years. What is less well known is that veteran, Edwardian, vintage or classic cars, which can retain their value or even appreciate, are also exempt. This is due to a little used provision in the 1992 legislation.
To fall under this exemption you must be driving a ‘mechanically propelled road vehicle’, so a horse-drawn carriage would not be covered, should you own one. Do not go rushing to buy a Grand Prix car like the 250F Maserati either; the statute says that your car must be ‘constructed or adapted for the carriage of passengers’, so one-seaters are out.
There are other reasons why older cars might be the smart move. Cars built before 1 January 1973 are eligible for ‘historic vehicle class’ and are therefore exempt from paying road tax in the UK. You can check the Heritage Motor Centre’s website if you are unsure whether your car is eligible for this tax break.
There are also tax benefits on death. If your car qualifies as ‘heritage property’, then it will be exempt from inheritance tax as long as you comply with certain conditions. These include providing reasonable public access to the car, which would be satisfied by arranging for it to be on display at a dealership for a certain periods during the year. You will also have to maintain the car to a reasonable standard so that the public can see it at its best.
Do be aware that your car must be an important one to obtain the heritage exemption. The statute says that only objects of ‘pre-eminent national scientific, historic or artistic interest’ are exempted, which means that it must be rare or interesting enough for a national, local authority or university collection. The threshold is high, but not impossible to pass.
If cars are not your preferred mode of travel, you should be aware that they are not the only moving objects to achieve special tax status. The ‘wasting assets’ capital gains tax exemption also covers yachts, motor boats and locomotives; it even covers racehorses. So whatever your chosen method of getting around, there may be a tax break to suit you.