I had my car in for its annual MOT recently and had the usual query as to whether my car’s number plate meant anything (it was a geeky present from my wife). Shortly thereafter, as he attacked the underside of my car with a hammer to see if it would fall apart, the conversation with the vehicle inspector turned to personalised registrations in general, the best ones we had seen (Jimmy Tarbuck’s COM1C for example), and especially as they are so popular, how they are taxed.
A cursory glance at HMRC’s manuals will give you the statement that “a car number plate is a chattel”. A chattel is broadly a personal asset (most common items being furniture, paintings or jewellery) that carry an exemption from Capital Gains Tax (CGT) for proceeds of up to £6,000 (per item or per set) and a reducing exemption above that figure. From this simple statement, you could be led to believe that a personalised registration (of less than £6,000 value) would be exempt from tax.
But unfortunately, you would be wrong. This part of the legislation refers to the actual physical number plate itself and given that most plastic number plates cost less than £50 from the local garage, HMRC are happy to exempt these from tax. Instead, when we talk about a personalised number plate, what we are actually talking about here is the right to carry the personalised registration on your vehicle. Here the legislation specifically states that the right to use a particular registration is NOT (my emphasis) a chattel. Therefore the value that you might have paid for the right to use a particular registration is definitely chargeable to tax and with some registrations commanding stratospheric prices (the UK record is now well above £500,000), this is definitely something HMRC are interested in.
If you purchased or were gifted the registration for personal use and after a number of years you decided to sell or gift it on, this would then be a chargeable asset for Capital Gains Tax (potentially covered by the annual CGT exemption). This would also apply if you still held the registration on the original vehicle which had been sitting in a barn somewhere and was now beyond all repair. The car itself would be exempt from CGT (otherwise everyone in the country would be claiming capital losses as their cars wore out) but the transferable registration would be assessable to CGT – something to remember as you clear out your garage.
If you purchased the registration with a view to realising a profit in the future, this would be considered something that would be assessable to income tax in the eyes of HMRC.
For businesses, it can be a little more complicated. Any personalised registrations owned by a business are assets. If there is a direct (demonstrable) link between the registration and the name of the business, input tax for VAT may be reclaimable (as advertising) but HMRC are known to challenge the commerciality of such claims. For example, a fleet of vans all carrying similar initials of individually relatively low cost would be viewed differently to just one very expensive registration on the director’s car.
A benefit in kind charge could even arise if the number plate is attached to an employee or directors own car which, if taken over a few years, could quickly equal and exceed the cost of the personalised plate in the first place. However, an additional benefit in kind should not arise if the personalised number plate is on a company car that is already treated as a benefit.
Finally, returning to personally owned private registrations, as the right to carry the personalised registration has an intrinsic value, on death they are also subject to Inheritance Tax as an asset. Therefore, if you do have a particularly valuable personalised plate and are considering retiring from driving, you may like to consider gifting the number plate as part of your longer term Estate Planning sooner rather than later.