A number of news outlets picked up on the story of a rare Aston Martin worth £1m that was recovered 14 years after it had been stolen. Unfortunately the victim of the crime, Christopher Angell, died before he could celebrate the return of his DB2 that took part in the 1949 Le Mans.
Mr Angell’s relative and, following his death, beneficiary of the DB2, decided to put the car up for auction due to the significant costs of restoration and upkeep. Of his decision to auction the car, Ashley Mack is reported to have said that, “even at this stage my heart will be pleased if it doesn’t sell but my head has to acknowledge that it will cost many thousands to restore” and that he is keen for the car to go to someone who is passionate about motor vehicles.
As well as highlighting the love and affection and the history associated with such cars, this story should also remind us about the taxation of classic cars and the opportunities for estate planning.
Helpfully, there is no capital gains tax on the sale or transfer of (classic) cars. That is an unusual opportunity which is not found with many other valuable assets such as shares or land. There are rules which capture those trading in cars.
There is however no exemption from inheritance tax.
If someone was wishing to pass on a classic car to a beneficiary, they may wish to consider a gift during their lifetime, on which no capital gains tax arises, and hope to survive seven years thereafter to have the value of the car ‘fall out’ of their estate for inheritance tax purposes. The result: a valuable asset has passed on to an intended beneficiary without capital gains tax or inheritance tax being suffered.
Of course, for a gift that has inheritance tax advantages, the person making a gift must not “reserve a benefit”. You could not simply transfer ownership to, for example, your child and continue to simply use and enjoy the car. If the intention is to make a gift but continue to use the car, further arrangements must be put in place. But this can be done and depending on the family circumstances, overall wealth and, very importantly, the personal objectives and wishes of those involved, can create the same result in terms of capital gains and inheritance tax.
It means that the thieves of the DB2 also ‘stole’ the opportunity to consider and carry out such estate planning. While we are not aware of the details of Mr Angell’s estate, there will be likely to have been tax liabilities associated with his estate on which there could have been attempts to mitigate if that car had not been stolen. Mr Mack will not pay capital gains tax on the sale at auction, but there will have been a likely tax loss somewhere for Mr Angell’s estate which may have then impacted on Mr Mack himself…maybe even to the extent of the amount needed to restore the car.
For those who do not wish to carry out any planning during their lifetime or do not feel comfortable with arrangements to regulate a gift and continued use of a classic car, it is important to have a will that works and has proper regard to this type of asset and how it should be looked after and sold, etc. following death. A lack of clarity and direction in that regard can result in unnecessary dispute and personal unhappiness and can impact on the car itself and its future use, maintenance, enjoyment and value.