Investing in private number plates

What considerations should be taken into account before investing in number plates?

Some plates require a substantial upfront investment, and not all appreciate in value. Trends and economic conditions can also affect prices, with plates tied to fleeting trends at risk of depreciation.

If a registration is bought with the intention of selling for profit, HMRC may treat this as a trading transaction, meaning profits are subject to income tax (with the potential to apply the £1,000 trading allowance). To find out if the buying and selling of private number plates could count as a hobby or trading transaction, you can read our badges of trade blog here.

Tax treatment of personalised number plates

From a tax perspective, HMRC treats generic number plates as a ‘chattel’, meaning that they attract low-level Capital Gains Tax (CGT) exemption for proceeds up to £6,000 and a reducing exemption above that figure.  The chattel refers to the number plate itself, however as the value of personalised number plates lies within its combination of numbers and letters, HMRC view this as an intangible asset, with this distinction having several tax implications:

Capital Gains Tax (CGT) and Inheritance Tax (IHT)

• The right to use a personalised registration is not considered a chattel. Therefore, CGT applies to any profit made on its sale (subject to the annual CGT exemption).
• If a number plate is owned at the time of death, its value is included in the estate for IHT purposes. This would also apply if you had a disused vehicle. The car itself would be exempt from CGT, but not IHT, and the transferable registration sold with the car would be assessable to CGT/IHT.
• If sold with a car, CGT will be due on the increase in the plate’s value since acquisition.

VAT considerations for businesses

Businesses may seek to reclaim VAT on personalised number plates, however strict conditions apply:

• To potentially be reclaimable, the plate must have a direct link to the business, typically as a form of advertising (e.g., ‘GHJ 1’ for GHJ Ltd). A number plate with the initials of the Managing Director of a company would be unlikely to be recoverable, particularly if the initials were different, e.g. “RST 1” for the Managing Director, with the business called “GHJ Ltd”.
• HMRC has historically challenged claims where plates appear to serve personal enjoyment rather than business promotion.
• If the number plate can be deemed to be advertising or publicising the business that is buying it, then it can be treated as an asset of the business, and VAT recovered accordingly. VAT would also be due on any onward sale.

Other considerations for businesses when purchasing private number plates

As we have mentioned, for the expenditure on the number plates to be allowable for tax purposes, you will need to justify that there is a benefit to the trade of having such a number plate. If you can, companies can claim tax relief at a minimum of 4% per annum on this cost or at the applicable amortisation rate. The cost of the physical plastic plate itself is treated as part of the car’s cost and subject to normal plant and machinery capital allowances.

• Where a plate is attached to a company car, no additional tax charge arises beyond the standard car benefit charge. This is because the physical value of the number plate is not superior to the plate it has replaced. HMRC consider the value lies in the intangible right to use a particular registration mark, which is separate from the plate itself.
• If a personalised plate is purchased for an employee’s private vehicle, it could be deemed a taxable benefit and reported on a P11D.