That’s Tax Free Sir

tax free

Tax free options can increase returns

An interesting trend to note especially during our current economic climate is tax avoidance. With people generating less income from various asset classes, they are constantly seeking tax free solutions to minimise their overall tax liabilities to offset their losses.

In July 2012 the French government announced it was to increase taxes on foreign-owned second homes. Capital gains tax (CGT) on property sales would rise from 19 per cent to 34.5 per cent. The extra in each case was being labelled a “social charge”.

Clearly – Governments that are cash stricken are clutching at straws.  Increasing taxes is only one way that a country can raise finance. The other prescription offered by the Fed is to simply print more money! But the two together is a way of the fiscal system having two bites of the cherry.

Ben Bernanke suggested last Friday that the bank might inject more money into the economy PHYS01_Animated_Gif_2_MPUvia so-called quantitative easing (QE). As a result the dollar suffered further deterioration and this affected a 3 % rally in the gold price. People can see that any further QE will devalue currency thereby enhancing the value of gold and with the likes of Bank of America Merrill Lynch predicting that gold will reach $2,000 before year end   – people are rushing in to pick up these price increases.

Demand for tax free gold

Some analysts refer to gold’s increase as a forgone conclusion, a question of when as opposed to if.  These people of course expect to maximise growth but they also want to legitimately minimise tax exposure. What if in addition to QE, governments start to mimic France’s latest CGT ploy?

The most noticeable trend amongst Physical Gold Ltd’s (PGL) clients is the overwhelming demand for Sovereigns and Britannia’s over the last few months. Both of these coins are “investment grade” which means that no VAT is payable but the real distinction between these gold coins and all other gold is that they’re CGT Exempt!

Investors have found a way of not only using gold as a saving mechanism and an insurance policy but also as a further guarantee if gold continues to rally – No Tax liabilities!

A further trend demonstrates that owing to the tax implications of these coins, the increase in value can sometimes be higher than the rising price of all other gold. Who now has two bites of the cherry?

Daniel Fisher

Daniel Fisher formed physical Gold in 2008, after working in the financial industry for 20 years. He spent much of that time working within the new issue fixed income business at a top tier US bank. In this role, he traded a large book of fixed income securities, raised capital for some of the largest government, financial, and corporate institutions in the world and advised the leading global institutional investors. Daniel is CeFA registered and is a member of the Institute of Financial Planning.

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