I buy my cars from auction, run them for 2 or 3 months and then try to sell them in the hope that I can enjoy depreciation free motoring. I have managed this 4 times so far this year and my insurer has just told me they will stop the policy if I change my car again!
They claim I should have trade insurance however I have a friend in the trade who has been having problems with his trade cover because he hasnt been turning over enough cars - I understand trade policies expect policy holders to sell a minimum of 25 cars a year.
I certainly wont be changing my car more than say 6 times a year but it does seem as though I will be unable to continue with my current insurer. As far as I am aware there is no small print warning of a limit of number of changes but I have been told the fifth change in a year could be declined.
It seems stange as of course the insurer charges an amendment fee and has made over £90 so far this year in changes to the policy.
Is anyone else in the same position of changing their car say 5 to 6 times a year? I do not wish to have trade cover, besides I know I wouldnt qualify for it anyway. I'd greatly appreciate it if someone could advise of a more flexible private car policy that allows up to say 6 changes a year. I do appear to be caught between a rock and a hard place in that I have too many changes for private cover but no where near enough for a trade policy.
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I would suggest you find a good broker.
From your description it may appear to your insurance that you're trading. Are you making a margin on these cars?
Alternitively discuss the issue with a senior underwriter within your insurance company. It may simply be that your activities have raised initial suspicions. Their initial response may have been a knee jerk reaction. You may find that they settle down once you've discussed it with them. Although there would probably be no limit on the number of changes to your car, there will be a trading exclusion. This is what they would use as their arguement.
I seem to recall that the Inland revenue were not interested in people who turned over less than 6 cars a year, unless they were obviously trading. I may be wrong. I would speak to an accountant on that one. Any profit that you can't write off may have to appear on a self assesment form, or you may imply have to notify them. Then you get into probs with the legal side of trading perhaps....
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I have a traders policy, but I don't trade cars. The policies are for people in the motor trade, not necessarily someone trading cars. I only have to notify my company at renewal time what vehicles I currently have, as long as I don't go over a value limit.
The problem you will have is explaining to an insurance company offering motor trades policies, is what type of motor trade you are in (which you aren't).
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Is trade cover expensive? Are there other benefits apart from being covered for many cars?
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Is trade cover expensive? Are there other benefits apart from being covered for many cars?
Depends what level of cover, and what company you go to. You can get cheap & cheerful policies that have a list of exclusions as long as your arm, and are backed by insurers you've never heard of. They come with a big excess, and exclusions for things like LHD and BMW M's, Ferraris, motorcycles etc. You also need to buy various 'parts' to get full cover, as it's really commercial insurance, not a motor policy. So you need road risks, private vehicle cover, and cover whilst at home/business premisis off the highway. Decent companies won't give you one without the other, and the other usually has some public 3rd party liability, cover for customer's possesions, service liability, goods in transite etc.
I pay about £2000 for mine.
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I seem to recall that the Inland revenue were not interested in people who turned over less than 6 cars a year, unless they were obviously trading. I may be wrong. I would speak to an accountant on that one. Any profit that you can't write off may have to appear on a self assesment form, or you may imply have to notify them. Then you get into probs with the legal side of trading perhaps....
I have also heard this. I thought the limit was 4 cars, not 6.
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I'm fairly certain it's 6 although i could be wrong
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You're both wrong! This is an urban myth.
If you're trading, you're trading regardless of the number of cars/transactions involved.
However with only a few cars it is harder for the inspector to prove that you are trading.
Anyway most habitual 'car changers' actually loose a fair amount of money.
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hxj, I agree with that, but isn't it possible that there is a de minimis level below which it's too much effort for the Revenue to chase the lost tax, given the difficulty in proving anything and the limited reward in terms of tax recovered?
In other words, it might not strictly be legal, but like driving at 71 mph on the motorway, you're all but certain of not being pursued for it?
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I'm sure that the Revenue do have a de minimis level below which chasing the lost tax is not worth it. In fact I can tell you that for a £100 fine, they will send threatening letters, then give up. (Yes, it was eventually sorted out, btw, but long after threatening letters had stopped arriving.)
But there is no such official limit. It depends on the size - with large companies I've agreed with Inspectors to 'forget' about some 6-figure sums (to save a lot of arguing on both sides); with small companies, lower-ranking Inspectors can get their knickers in a twist over a few hundred pounds of tax - or less.
I should be happy to construct a good argument as to why hatman should be paying tax on his profits. And I suppose an argument as to why he should not be paying that tax.
It's not even a so-many-per-year. e.g. the poster a few weeks ago who had ordered a supercar and had 'decided' he no longer wanted it, so was going to sell it at a profit. As a one-off transaction that could still be argued as trading if he had always intended to sell the car at a profit. They probably wouldn't push that one, as had he sold it at a loss, the corollary would be that the loss would be deductible against profits.
The reason there is no CGT to pay on the sale of private motor cars is that most people make a huge loss on their cars, so would forever be offsetting the losses against the gains on their shares. For the few who make a profit, the Revenue are happy to forgo that tax.
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I agree with all of what you say above.
However the pain goes into demonstrating that the amounts are in fact small ....
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Anyway most habitual 'car changers' actually loose a fair amount of money.
I would totally subscribe to that... I tried in vain to buy at an Auction and then sell on at a profit. On paper, yes profits are possible. Not in the real world, unless you happen to live in a very large catchment area for potential buyers.
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Oops! I think we may have drifted off topic here a bit, and I am partly responsible ;)
I don't want to dampen any discussion about the tax issues but, Hatman has an insurance issue he's laid out in his opening post. If anyone can help any further with that, please do.
Also, if Hatman resolves this I'd like to know how.
Hugo
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