Personalised numberplates continue to be sought after with some achieving stratospheric values. The most valuable registration sold in the UK was in excess of £518,000 and worldwide, the record is over £7.25m (Dubai). Consequently, HMRC have not been slow to seek tax.
Looking at HMRC’s manuals, you will see that “a car numberplate is a chattel”. A chattel is broadly a personal asset that attracts a low-level capital gains tax (CGT) exemption for proceeds of up to £6,000 (per item or per set) and a reducing exemption above that figure.
Therefore, you might believe that a personalised registration (of under £6,000 value would be exempt from tax. Unfortunately, it is not.
The chattel legislation refers to the numberplate itself and given that most are plastic and cost under £50, HMRC are happy to exempt these. Instead, when we talk about a personalised numberplate, we are actually discussing the right to carry the personalised registration on your vehicle. Here, legislation specifically states that the right to use a particular registration is NOT a chattel.
If you have a personalised registration for personal use, this is subject to CGT on any profit when sold (potentially covered by the annual CGT exemption). If you die owning the registration, the value is assessable to inheritance tax (IHT). This would also apply if you had a disused vehicle, say, in a shed. The car itself would be exempt from CGT (but not IHT) but the transferable registration sold with the car would be assessable to CGT/IHT .
If you purchased the registration with a view to realising a profit in the future, HMRC would consider this a trading transaction – even if you only did it once (but you may be able to use the £1000 trading allowance against any profit).
For businesses, any personalised registrations are assets. You may be able to reclaim VAT if you can demonstrate a link between the registration and business (as advertising) but HMRC are known to challenge the commerciality of such claims. If the registration has no direct link, a taxable benefit could even arise. (Compare a fleet of vans with similar registrations to an expensive one on the director’s car).
Now you know the tax implications, you know what to ask S4NTA for Xmas.