Can my company buy gold coins as an investment?

26 October 2023

Christie Inns

Reducing Tax

As inflation rises, the value of your money falls.

So should gold coin investment be something that you should look into?

What you can buy with £100 in 10 years’ time will be considerably less than what you can buy for this amount today.

Just look at the timeline of Freddo prices as an example –

What did cost just 10p on it’s relaunch in the 90s, now costs close to 50p a piece!

Applying This in Business

Now apply the same maths to the cash currently sitting in your company’s bank account.

The consumer price index is currently sitting at 6.8%; say you’ve currently got £20,000 in the bank, at this inflation rate your money will only be worth £14,394 in just 5 years’ time.

How can I ensure my money holds it’s value?

Well, gold coins could be a solution for any spare cash you’re looking to invest.

A Quick History Lesson…

The Royal Mint produced the first gold proof sovereign in 1979, although sovereigns were of course legal tender in the UK much earlier than that, dating all the way back to Henry VII in the 1400’s.

When a sovereign is ‘proof’, it’s of higher quality.

It is polished, double stamped and wrapped up in a clear plastic protective sleeve and fancy box.

It’s the ‘proof’ coins that you should be looking at to start your collection!

Do Gold Coins Keep Their Value?

As an example let’s look at the 2002 Gold Proof Sovereign, a 22-carat gold finished proof commissioned especially for the Golden Jubilee

Now back in 2002 when this was released, you could get your hands on it for around £180.

Fast forward to today and The Royal Mint are now selling this exact coin for £1,155.

This is just over a 540% increase in near enough 20 years.

In Comparison

Now compare this to a 20-year index linked gilt (what’s considered to be a stable relatively risk-free investment.)

The RPI has risen by just over 106% between 2003 and 2023, a fraction of the growth on the sovereign.

Of course, this is just one example, and all sovereigns vary in value.

But typically you’re looking in the £500 – £1,000 range currently for sovereigns released in the early noughties for a fraction of that price.

What’s the tax position if my company buys gold coins?

Purchasing gold sovereigns isn’t an allowable expense for tax purposes, so unfortunately it won’t reduce your company’s taxable profit.

However when you come to sell your gold coins, the gain will be exempt from tax.

This is because all sovereigns minted after 1837, being legal tender at some point in time, are not chargeable assets for capital gains purposes.

In Contrast

Going back to our £20,000 sitting in the company bank account and using the 540% value increase of our 2002 proof sovereign, that’s potentially a tax-free gain of £108,000 if all the money was invested in proof sovereigns!

Beware though that the tax exemption only applies to sterling coins that were once legal tender.

If you were to invest in foreign coins, such as the Krugerrand, any gains you make on a sale would be taxable.

An alternative form of investment…

So if your business has some spare cash and you’re looking for a stable, easy access investment that can give you a good return then you should keep gold proof sovereigns in mind.

The same rules apply to individuals looking to purchase coins in their own name rather than through a company.

A tax free gain!

Disclaimer

Warning: The value of investments such as gold can fall as well as rise.

You may get back less than you invested.

This article is not intended to provide investment advice but to simply look at the tax implications of investing in gold.

Rarely, if you are buying and selling coins very frequently and in many transactions, HMRC may attempt to tax the proceeds as income from a trade rather than a capital gain.

Whilst this is unlikely, as coins are most likely a long term investment, we thought it worth mentioning.

Professional advice should be taken prior to investing in gold coins to ensure there are no implications for inheritance tax or with regards to any future claim to Business Asset Disposal Relief.

We are happy to advise on such matters if necessary.

If you are looking for investment advice please speak to an independent financial adviser.

Get In Touch With Us

At Friend & Grant we are always on the lookout for great ways for business owners to take advantage of the many benefits available from operating your own limited company. To find out more about how we can help you save tax why not contact us to arrange a free initial meeting.