Does tax need to be paid while selling a car?

zreba

A > B

If I buy a car for a price A and then manage to sell it for price B (B>A), do I need to pay any tax or something like this? is this treated as an income?

Thanks,
Marcin

Thomas_S_Hunterson

AFAIK you should have to pay capital gains, which is 20% on the profit.

markymac

zreba wrote: »

A > B

If I buy a car for a price A and then manage to sell it for price B (B>A), do I need to pay any tax or something like this? is this treated as an income?

Thanks,
Marcin

Prob not, but if you were doing it alot you would really be dealing in used cars, so possibly would have to. I don't think one car would be subject to having to pay tax on it.

JoeySully

iv done this with every car i have ever bought and then sold and nobody has ever come looking for tax off me. then again the profit was only in the 100's rather than 1000's. You may have to if you sell more than 6 or 7 a year or something like that - you are then classed as a dealer.

Thomas_S_Hunterson

JoeySully wrote: »

iv done this with every car i have ever bought and then sold and nobody has ever come looking for tax off me. then again the profit was only in the 100's rather than 1000's. You may have to if you sell more than 6 or 7 a year or something like that - you are then classed as a dealer.

Well you're supposed to declare it yourself. It's unlikely, but entirely possible that revenue could smack you with a bill along with interest on unpaid taxes.

zreba

JoeySully wrote: »

iv done this with every car i have ever bought and then sold and nobody has ever come looking for tax off me. then again the profit was only in the 100's rather than 1000's. You may have to if you sell more than 6 or 7 a year or something like that - you are then classed as a dealer.

Don't I need to be a registered Company to be classed as a dealer?

Gregor Samsa

Sean_K wrote: »

AFAIK you should have to pay capital gains, which is 20% on the profit.

I think there's a personal exemption of 1,270 euro per year regarding CGT, so your profit would have to be more than that (assuming you weren't also selling other assets that would eat into your exemption) to be liable for the tax.

zreba

phutyle wrote: »

I think there's a personal exemption of 1,270 euro per year regarding CGT, so your profit would have to be more than that (assuming you weren't also selling other assets that would eat into your exemption) to be liable for the tax.

cool, thanks, but maybe you know where can I find some official info? I searched revenue.ie website but couldn't find anything...

Gregor Samsa

zreba wrote: »

Don't I need to be a registered Company to be classed as a dealer?

No, you could be a sole trader.

If you're engaged in business activity that would make you liable for tax, it's up to you to register with Revenue.

Seth Brundle

If you sell a car privately, presumably no part of the transaction is officially recorded so technically (in Bertie-land) no profit was made!

Anyhow, from http://www.revenue.ie/index.htm?/faqs/faq_cat2.htm#section3

3. Do all disposals of assets give rise to CGT liability?

No, not all disposals (of assets) give rise to a charge of CGT. For example, any gains arising in the following circumstances are not regarded as giving rise to chargeable gains and hence are not liable to CGT

* Gains from the disposal of Governmental Stocks and Securities.
* Gains from the disposal of tangible movable property, where the amount or value of the consideration does not exceed €2,540.
* Gains from the disposal of wasting assets, i.e. assets with a predictable life of less than 50 years, for example, a private motorcar, livestock etc.
* Gains from the disposal of your principal private residence. (See questions 12 & 18)
* Prize Bond, Lottery and Gaming winnings.

Gregor Samsa

zreba wrote: »

cool, thanks, but maybe you know where can I find some official info? I searched revenue.ie website but couldn't find anything...

There's some PDF guides here

http://www.revenue.ie/index.htm?/publications/leaflets/infolef7_c.htmThe

first one (Guide to Capital Gains Tax) gives all the info. Chapter 5 covers the exemption.

EDIT: kbannon's post wins!

-Chris-

I'd be pretty sure you'd be liable for income tax on the profit rather than capital gains tax.

Gandalf23

Definitely not subject to CGT for the reasons mentioned above.

You may however be considered to be "trading" ("trading" = tax, "non-trading" = no tax). If you are trading you will be liable to be taxed under Income Tax law (Schedule D case I trading income). There are no definates on what is "trading", but the "Badges of Trade" give guidance (see below ... direct from Revenue website).

My experience of this in practice is that anyone buying and selling a car (or two, or even three) will not be considered to be trading. Anything over that is likely to be "trading".

(This reminds me of the days I used to lecture taxation !!!!)

The most relevant badges here are probably "motive" (ie were you making the sale purely to make profit rather than just upgrading he car for example), "lenght of period of ownership" (ownership for shorter periods means its more likely to be trading income), and "frequency of similar transactions" (this is the deciding factor in most cases like this).

Anyway, here are the badges of trade in full (important bits in bold).


"The Tax Acts do not set out any specific rules for distinguishing between trading and non-trading income. However, a fairly well established set of guidelines have been laid down by the courts in various decided cases over the years. These are known as the “Badges of Trade”, which include: -

1. THE SUBJECT MATTER OF THE SALE.
Whilst almost any form of property can be acquired to be dealt in, those
forms of property, such as commodities or manufactured articles, which are
normally the subject of trading, are only very exceptionally the subject of
investment. Again, property, which does not yield to its owner an income, or
personal enjoyment merely by virtue of its ownership is more likely to have
been acquired with the object of a deal than property that does.
2. THE LENGTH OF PERIOD OF OWNERSHIP.
Generally speaking, property meant to be dealt in is realised within a short
time after acquisition. But there are many exceptions from this as a universal
rule.
3. THE FREQUENCY OF SIMILAR TRANSACTION.
If realisations of the same sort of property occur in succession over a period of years or there are several such realisations at about the same date a presumption arises that there has been dealing in respect of each.
4. SUPPLEMENTARY WORK.
If the property is worked up in any way during the ownership so as to bring it
into a more marketable condition, or if any special exertions are made to find
or attract purchasers, such as the opening of an office or large-scale
advertising, there is some evidence of dealing. When there is an organised
effort to obtain profit there is a source of taxable income. But if nothing at all
is done, the suggestion tends the other way.
5. THE CIRCUMSTANCES THAT WERE RESPONSIBLE FOR THE
REALISATION.
There may be some explanation, such as a sudden emergency or opportunity
calling for ready money that negates the idea that any plan of dealing
prompted the original purchase.
6. MOTIVE.
There are cases in which the purpose of the transaction and sale is clearly
discernible. Motive is never irrelevant in any of these cases and can be
inferred from surrounding circumstances in the absence of direct evidence of
the seller’s intentions.

It is however, important to appreciate that the “whole picture” must be taken
into account, so that the weight to be given to the various factors may vary
according to circumstances. Furthermore, it is important to recognise that any given factor may be present to a greater or lesser degree, and that the
absence (or presence) of any single factor is unlikely to be conclusive in its
own right".

Anyway, hope that helps.

G23

zreba

Gandalf23 wrote: »

Definitely not subject to CGT for the reasons mentioned above.

You may however be considered to be "trading" and thus liable to be taxed under Income Tax law (Schedule D case I trading income). There are no definates on what is "trading", but the "Badges of Trade" give guidance (see below ... direct from Revenue website).

My experience of this in practice is that anyone buying and selling a car (or two, or even three) will not be considered to be trading. Anything over that is likely to be "trading".

(This reminds me of the days I used to lecture taxation!!!!)

The most important bits are probably "motive" (ie were you making the sale purely to make profit rather than just upgrading he car for example), "lenght of period of ownership" (ownership for shorter periods means its more likely to be trading income), and "frequency of similar transactions" (this is the deciding factor in most cases like this).

Anyway, here are the badges of trade in full (important bits in bold).


"The Tax Acts do not set out any specific rules for distinguishing between trading and non-trading income. However, a fairly well established set of guidelines have been laid down by the courts in various decided cases over the years. These are known as the “Badges of Trade”, which include: -

1. THE SUBJECT MATTER OF THE SALE.
Whilst almost any form of property can be acquired to be dealt in, those
forms of property, such as commodities or manufactured articles, which are
normally the subject of trading, are only very exceptionally the subject of
investment. Again, property, which does not yield to its owner an income, or
personal enjoyment merely by virtue of its ownership is more likely to have
been acquired with the object of a deal than property that does.
2. THE LENGTH OF PERIOD OF OWNERSHIP.
Generally speaking, property meant to be dealt in is realised within a short
time after acquisition. But there are many exceptions from this as a universal
rule.
3. THE FREQUENCY OF SIMILAR TRANSACTION.
If realisations of the same sort of property occur in succession over a period
of years or there are several such realisations at about the same date a
presumption arises that there has been dealing in respect of each.
4. SUPPLEMENTARY WORK.
If the property is worked up in any way during the ownership so as to bring it
into a more marketable condition, or if any special exertions are made to find
or attract purchasers, such as the opening of an office or large-scale
advertising, there is some evidence of dealing. When there is an organised
effort to obtain profit there is a source of taxable income. But if nothing at all
is done, the suggestion tends the other way.
5. THE CIRCUMSTANCES THAT WERE RESPONSIBLE FOR THE
REALISATION.
There may be some explanation, such as a sudden emergency or opportunity
calling for ready money that negates the idea that any plan of dealing
prompted the original purchase.
6. MOTIVE.
There are cases in which the purpose of the transaction and sale is clearly
discernible. Motive is never irrelevant in any of these cases and can be
inferred from surrounding circumstances in the absence of direct evidence of
the seller’s intentions.
It is however, important to appreciate that the “whole picture” must be taken
into account, so that the weight to be given to the various factors may vary
according to circumstances. Furthermore, it is important to recognise that any given factor may be present to a greater or lesser degree, and that the
absence (or presence) of any single factor is unlikely to be conclusive in its
own right".

Anyway, hope that helps.

G23

yeah, this makes sense...
in this case I would need to register myself as a sole trader, right?
Does it conflict in any way with my regular employment?
Or those (employment, sole trader) can be treated separately?

BTW - thanks all of you for your help!!

Gandalf23

zreba wrote: »

yeah, this makes sense...
in this case I would need to register myself as a sole trader, right?
Does it conflict in any way with my regular employment?
Or those (employment, sole trader) can be treated separately?

BTW - thanks all of you for your help!!

Roughly how many cars are you planning to buy/sell?

You may have a few tax issues here ... if you are importing and selling this is an absolute red flag to Revenue these days... they will definitely be aware of you and you are 95% likely to get a tax audit of some variety.

You may also have VAT issues... which may involve VAT registration, deposits, etc etc etc.

This is a fairly complex situation by the sound of things ... my strong advice (if you are buying/selling over 5 cars p.a. and ESPECIALLY if you are importing from the UK to sell here) is to go see an accountant.

Marcus.Aurelius

Due to the nature of the sale, Revenue do not expect you to pay any capital gains tax or income tax, AFAIK.

mickdw

As a sole trader you will have the earnings added to other income for tax purposes so you will proably end up paying 40% of profits after expenses assuming you crrently earn over the the lower tax bracket

Steve

As long as it wasn't in sterling and your secretary didnt sign the deposit slip then your in the clear - oops hang on if theres a tribunal then you're knackered.:rolleyes:

zreba

Gandalf23 wrote: »

Roughly how many cars are you planning to buy/sell?

You may have a few tax issues here ... if you are importing and selling this is an absolute red flag to Revenue these days... they will definitely be aware of you and you are 95% likely to get a tax audit of some variety.

You may also have VAT issues... which may involve VAT registration, deposits, etc etc etc.

This is a fairly complex situation by the sound of things ... my strong advice (if you are buying/selling over 5 cars p.a. and ESPECIALLY if you are importing from the UK to sell here) is to go see an accountant.

No, I didn't mean importing, just buying registered car in Republic of Ireland and selling it here as well...

Henry Ford III

zreba wrote: »

No, I didn't mean importing, just buying registered car in Republic of Ireland and selling it here as well...

Trading is trading.

zreba

Henry Ford III wrote: »

Trading is trading.

yes sure, I'm fully understand this so that I'm asking those all questions

I don't mind paying taxes, but what you suggest in this case can I split my income from a regular employment and register also as a Sole trader?

and also anyone know what is the level of income from trading I don't need to register for VAT?

Thanks again lads,

Marcin

Marcus.Aurelius

zreba wrote: »

yes sure, I'm fully understand this so that I'm asking those all questions

I don't mind paying taxes, but what you suggest in this case can I split my income from a regular employment and register also as a Sole trader?

and also anyone know what is the level of income from trading I don't need to register for VAT?

Thanks again lads,

Marcin

Rather than relying on advice on forums, you may be better served by ringing your local Revenue Office, they're usually very good-natured, no bull, and will tell you definitively what you can and can't do regarding income from the sale of private motor vehicles.