Tax Advantages for the UK Vintage Watch Collector

In recent years, certainly since the early 1990s, the value of vintage wristwatches by the famous Swiss houses has increased enormously. The performance of these items has been so spectacular that the phenomenon of the classic wristwatch has regularly caught the attention of the media, with articles on buying period timepieces as investments appearing in a whole range of publications from The Sunday Times through to Country Life.

A major catalyst for the enthusiasm for investing in vintage watches is undoubtedly that HM Revenue & Customs in the UK regards these as “wasting assets” and does not charge Capital Gains Tax on the profits made when they are sold, provided they have not been used in the course of business.

We might well ask why vintage watches, which as most visitors to this site are well aware have the potential for extreme longevity, have been conveniently placed in this category. In summary, the answer lies in their nature as pieces of machinery. HM Revenue & Customs takes the generalised view that machinery steadily reduces in value during the course of its life to the point where, at fifty years old, it ceases to have monetary worth. Items that fall into this bracket are termed wasting assets and are exempt from Capital Gains Tax when liquidated.

For the investor, this strange anomaly is something of a gift from the taxman. If money is retained in a bank account, the interest earned is taxable. If a second property is purchased and then disposed of, again, there will be tax to pay on the profit generated by the sale. But if the same funds are used to purchase a selection of vintage watches and then, in due course, these are sold at a profit, no Capital Gains Tax is owed to the Revenue.

This situation is not unique to vintage watches. Antique guns, classic cars and motorcycles, antique scientific instruments and some mechanical toys all qualify as wasting assets in the same way. When we understand this, we can begin to appreciate why the values of old Ferrari sports cars, Vincent motorcycles, Purdey and Holland & Holland shotguns, fine early long case clocks and vintage train sets have all soared so sharply in recent years, with Sotheby’s, Christie’s and Bonhams all running specialist sales themed around these commodities. For once, it appears that buying very satisfying luxury items is also a financially lucrative action. When a profit is made from these goods, no tax is due.

In conversations with our buyers over the last ten years, it has been very noticeable that many of them are acquiring vintage watches because of their potential to be tax free investments. We are vintage wristwatch dealers and not chartered accountants, but even so it seems very worthwhile to include a mention of the wasting assets concept on our website for the benefit of those who may not have been aware of its existence. At the time of writing, we are confident that the material here is correct, but we provide it as background information only and cannot take responsibility for its application. We strongly advocate that anyone wishing to obtain specific advice regarding the tax advantages that can be obtained by investing in wasting assets in their personal situation contacts their accountant or professional financial advisor. We would also recommend that the official HM Revenue & Customs website is worth a look, where the very relevant examples of antique clocks and watches as wasting assets are discussed in a specific notice ( CG76904 Wasting Assets- Clocks and Watches)