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Gold bars and UC

VRW
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sorry this is exceptionally random and im not even 100% sure where to start

we have a tenant that potentially might have 3 gold bars in a safe, im saying potentially as i dont 100% know if they are real or possibly gold plated - she previously hasnt been entitled to benefits due to having a massive amount of savings - however these savings have gone

how would UC/DWP treat the gold bars?? would they be classed the same as stocks/shares,  personal possession or even treated as market value capital?

I literally have no idea - any ideas suggestions would be great - in all the years ive done benefits surprisingly ive never come across someone with a gold bar before

UB40
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Personal possessions are disregarded for UC assessments. This would include for instance gold as a wedding dowry, however great the value. Where there would be an issue is if the possession had been purchased with the intention to reduce capital in order to claim Benefits ( deprivation ).

https://www.legislation.gov.uk/uksi/2013/376/regulation/46

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1038390/admh1.pdf

Charles
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Interesting you say gold as a wedding dowry would be fine. Why would it be any different to, say, shares or a property given as a wedding dowry?

Elliot Kent
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This is quite an interesting question. The value of the gold bars is quite obviously “capital” and its value can be easily determined - gold after all is one of the oldest and most stable investment vehicles which exist. The question is whether or not the bars themselves fall to be disregarded as “personal possessions”.

The case law suggests a very expansive view of what “personal possessions” are which encompasses “any physical assets other than land and assets used for business purposes” (R(H)7/08). This definition was capable of including a caravan in that case and, e.g. a classic car (see JJ v SSWP (IS) [2012] UKUT 253 (AAC) where the claimant’s Aston Martin was necessarily either a personal possession or a business asset). It would fairly clearly be able to cover all manner of things such as artwork, jewellery, expensive guitars or valuable stamp collections. So that all seems rather optimistic for your client.

It really does make me pause for thought though as to whether it is really the intention of R(H)7/08 to go as far as to say that unlimited amounts of gold bars can just be disregarded entirely solely as a result of the fact that they have a physical form (as opposed to, say, shares). It seems to me that the point which was being made in that case was that the disregard exists to protect claimants from an intrusive and degrading exercise of being made to demonstrate that they have sold off any potentially valuable possessions they may have had before being able to claim benefit - inherited jewellery with sentimental value, cars they need to take their kids to school and so on. I don’t immediately see why that principle requires a safe of gold bars to be treated differently to a safe filled with an equivalent amount of cash - certainly, the thought of trying to explain why that should be the case to an FtT judge makes me wince somewhat.

(Of course you have the deprivation rules, so that someone who had demonstrably bought gold bars in anticipation of needing to make a UC claim would be caught out. But surely its just as likely that someone may have bought the gold bars many years prior on the basis that they are an investment without necessarily anticipating the future claim and now receives a windfall for having invested in a physical gold bar rather than having bought shares or having put the money in a savings account)

UB40
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Hi Charles,

I was thinking of an instance where gold jewellery worth over £20,000 had previously been given, as is often the custom in an Indian wedding. The DWP were not interested in these items. As for other assets ....

What is capital
3. investments such as
• businesses
• capital and income bonds
• individual savings accounts (ISAs)
• national savings certifcates
• personal pension schemes
• premium bonds
• stocks and shares
• unit trusts
4. real property or in Scotland heritable property, that is land and anything that has its foundations in the
land such as a house and
5. a benefcial interest in the capital of a trust

Paul Stockton
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“Social Security Legislation 2016/17” [sorry, don’t have a more up to date version] vol 2 p73 has this passage, in considering the equivalent provision in the IS regulations:

“Presumably anything which is not real property is a personal possession. Provided that it is an object and not a right to sue for something, like a debt. But hard lines might have to be drawn between coins and bank-notes (obviously capital) and investments like paintings, stamps, furniture (apparently disregarded). What about gold bars?”

So if the editors of Social Security Legislation don’t know the answer how can we?!

You do seem to be on safe ground if you can rely on R(H)7/08, especially as the DWP seem to accept it. But, like Elliot, I’m doubtful about this very expansive definition of personal possessions. If gold bars and stamps are OK why aren’t coins and bank-notes? My personal opinion is that for something to be a personal possession it has to be something that has a function, at least in theory, other than as a repository of value. So pictures and books would be personal possessions even if they were acquired as investments and locked away in a vault, but coins and bank-notes would definitely be capital. There might still be an issue about coin collections, I suppose, but gold bars would surely fall on the capital side of the line. They have no function beyond their value, assuming even the most vulgar of rich people don’t put them on display or use them as doorstops.

Jon (CHDCA)
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Paul Stockton - 10 December 2021 03:39 PM

.. My personal opinion is that for something to be a personal possession it has to be something that has a function, at least in theory, other than as a repository of value. So pictures and books would be personal possessions even if they were acquired as investments and locked away in a vault, but coins and bank-notes would definitely be capital. There might still be an issue about coin collections, I suppose, but gold bars would surely fall on the capital side of the line. They have no function beyond their value, assuming even the most vulgar of rich people don’t put them on display or use them as doorstops.

Hm, I’d have thought, in the distinction between “money” and “items you buy with money”, that gold bars would be the latter, i.e. personal possessions.

In vague support of that, there is a hypothetical reference in CIS/563/91 para 35

if for instance a vendor requires payment for the interest to be made partly or wholly in gold bars or cases of wine, the expenditure of money to acquire those items could not be said to be for the purpose of acquiring the interest in the dwelling.

A grey area could be as you say, coin collections. E.g. gold krugerrands are nominally legal tender in South Africa, but are generally used for heirlooms, or investments. We once had a client return from South Africa with no cash but a significant amount of krugerrands, I don’t think we found out whether he followed our advice to report them to DWP and see what they made of them.

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Elliot Kent
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UB40 - 10 December 2021 05:25 PM

Here is the updated guidance as of 28 October 2021

http://data.parliament.uk/DepositedPapers/Files/DEP2021-0835/159_Treatment_of_capital_V11-0.pdf

I’m not sure it really addresses the position of what is to be done about gold bars at all though?

HB Anorak
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I re-read R(H) 7/08 last night to see if there was some sort of distinguishing context.  I was thinking in particular that the comments would only apply to objects which would otherwise fall to be categorised as real estate - the caravan is not part of the land, but if it was it would be “premises” for capital disregard purposes.  But it really is hard to limit the decision to that narrow context.  Any tangible object that (a) you don’t use for business purposes and (b) is not part of a real estate asset must by default be a personal possession.

You sometimes find that a decision has far reaching consequences beyond the immediate facts of the case - thinking of decisions on “remunerative work” where the Commissioner bent over backwards to find that someone was not in remunerative work so that they could claim out of work DWP benefits and it is very hard to ignore those decisions in cases where the claimant wants to be in remunerative work so they or their partner can have higher earnings disregards in HB.

VRW
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im so glad that its as clear for everyone else as it is for me haha!!!!

she had these gold bars for so long she forgot she had them (luckily for her up till this point shes always had money/savings to not claim anything)

think its going to be a test the water and see - i would argue the personal possession similar to watches/jewelry etc. and see where we get with that

ill update when i know more

Gareth Morgan
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... and if you buy gold as an investment but never physically hold it?

Elliot Kent
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Gareth Morgan - 13 December 2021 12:59 PM

... and if you buy gold as an investment but never physically hold it?

The case law seems to draw a bright line between physical objects and legal rights.

If you own 3% of the shares in a company which owns 100 gold bars, then there is no disregard.

If you own 3 specific gold bars which sit in a vault of 100 gold bars which you have never been to, then perhaps there is a disregard.

If you personally own a Banksy, then its disregarded. If you own £16,000 worth of shares in a Banksy, then no UC for you: https://www.masterworks.io/research/post/O0p5MYsza0Y6YcC2Pu6jb

Va1der
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Money is designed specifically to facilitate transactions. Its value isn’t inherent, but rather set (and guaranteed) by the state. It generally has the greatest liquidity.

Gold in a generic form is different - it carries some immediate value due to being shiny, and is otherwise utilised for many different functions, due to conductivity, low reactivity etc. It is prized for its properties. Liquidity varies greatly by its form - similar to other ‘possessions’.

But when you turn it into a bar, I think that is a material difference - especially if we’re talking bullion (high standard of purity). In this form gold is specifically stored as a relatively value stable asset.

Foreign currency is still capital - gold bullion, arguably, has greater liquidity than the currency of at least an unstable state.

Jon (CHDCA)
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Elliot Kent - 13 December 2021 01:52 PM

If you own 3 specific gold bars which sit in a vault of 100 gold bars which you have never been to, then perhaps there is a disregard.

“Specific” is an interesting word. Though I think there is no rule that defines all fungible goods as capital. Maybe there should be ...

PS, it may be worth checking just how big are these gold bars. If they’re tiny, they might not reach £16K, which could save some trouble. :)

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Elliot Kent - 13 December 2021 01:52 PM

If you own 3 specific gold bars which sit in a vault of 100 gold bars which you have never been to, then perhaps there is a disregard.

If you do visit the vault, just to say hello, then things are different?  If you have the gold bars and then put them in a vault, what then.

Schrodingers gold?

Elliot Kent
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Gareth Morgan - 13 December 2021 03:03 PM
Elliot Kent - 13 December 2021 01:52 PM

If you own 3 specific gold bars which sit in a vault of 100 gold bars which you have never been to, then perhaps there is a disregard.

If you do visit the vault, just to say hello, then things are different?  If you have the gold bars and then put them in a vault, what then.

Schrodingers gold?

The test from R(H)7/08 is that (1) you own it (2) it is a physical object and (3) it is neither land nor a business asset. Where it happens to be in the world, how it is stored or your level of access to it do not seem to be relevant considerations.

VRW
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Gareth Morgan - 13 December 2021 03:03 PM
Elliot Kent - 13 December 2021 01:52 PM

If you own 3 specific gold bars which sit in a vault of 100 gold bars which you have never been to, then perhaps there is a disregard.

If you do visit the vault, just to say hello, then things are different?  If you have the gold bars and then put them in a vault, what then.

Schrodingers gold?

i laughed far too much at schrodingers gold

HB Anorak
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Schrodinger’s Gold sounds like a Burt Reynolds film

Paul Stockton
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Elliot Kent - 13 December 2021 01:52 PM

... If you personally own a Banksy, then its disregarded. If you own £16,000 worth of shares in a Banksy, then no UC for you: https://www.masterworks.io/research/post/O0p5MYsza0Y6YcC2Pu6jb

But if the Banksy is not a separate painting but has been spray-painted onto a wall which you own but which otherwise has no quantifiable value, but is now very valuable because it has a Banksy on it, which side of the bright line does it fall?

[ Edited: 14 Dec 2021 at 10:47 am by shawn mach ]
MareeH
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Jon (CHDCA) - 13 December 2021 02:43 PM
Elliot Kent - 13 December 2021 01:52 PM

If you own 3 specific gold bars which sit in a vault of 100 gold bars which you have never been to, then perhaps there is a disregard.

“Specific” is an interesting word. Though I think there is no rule that defines all fungible goods as capital. Maybe there should be ...

PS, it may be worth checking just how big are these gold bars. If they’re tiny, they might not reach £16K, which could save some trouble. :)

Gold is currently £43.27 per gram.

£16,000 of gold would therefore weigh 369.77g

Divide that by the density of gold (19.3g/cm3) gives you a volume of 19.17cm3

That’s a gold bar of 2cm x 2cm x 4.79cm.  Not very big!

(This is all assuming 24ct)

Jon (CHDCA)
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The Royal Mint‘s ‘best seller’ gold bar is £63.98 for 1g. (NB, for those buying Xmas presents, their £556,974.90, 400oz gold bar has only ‘limited stock’...)