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Selling off old record collection

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Client has a record collection, amassed over several years. Sold a few hundred records of this collection on ebay for about £25k last year.  What is the tax treatment?

Having considered the badges of trade and the various options, income tax, capital gains, not trading. I am still left thinking I am not sure. The Revenue has no guidance that is of any relevance, they just point you to the badges of trade. I am not sure that much tax is involved because if we are trading then surely we must value the collection the date we started trading, so sales and cost will net off, for capital gains (which is the way I am thinking of going) then this would be a wasting asset and therefore nothing to pay. Views on this would be appreciated.

 

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RLI
By lionofludesch
17th Jan 2020 12:26

I vote not trading.

Sounds to me like he had no intention of buying stuff with a view to selling it.

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Replying to lionofludesch:
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By peterdell
17th Jan 2020 12:37

Thanks.

I kind of feel if I put a note to that effect in TR7 and go that route that's probably the way forward. I am not sure HMRC will be happy with it, but we will run with it and see if its challenged.

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Replying to lionofludesch:
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By chicken farmer
17th Jan 2020 12:37

But what may have started off as a hobby can become a trade. As usual we haven't enough detail to judge. But the fact that he is selling on eBay and the numbers of records sold suggest client may now be trading.

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Replying to chicken farmer:
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By peterdell
17th Jan 2020 12:58

You do have enough information, the client has amassed a record collection in the eighties and is now selling it. What more do you need? The client is selling it on ebay to many different buyers. I agree it could well be a trade but that is why I asking other peoples opinions because different people will have different views and I am really not sure what way to go. I am thinking capital gains so no trade. If he was to start buying and selling records then that would amount to a trade and this would be kept separately. Thats already been discussed and agreed. His pre-owned old record collection, even if we do bring it in as a trade then the value of the collection will be market value at the date the trade commences so nothing for the Revenue. There is no tax issues here I am just trying to get it correct.

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Replying to peterdell:
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By Wanderer
17th Jan 2020 14:39

peterdell wrote:

You do have enough information, the client has amassed a record collection in the eighties and is now selling it. What more do you need?

Quite an aggressive answer considering that you are only just disclosing the relevant fact of amassed in the eighties, compared to what you originally said.
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Replying to Wanderer:
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By peterdell
17th Jan 2020 15:55

Not really, I have been on this forum for years and as the old saying goes, if you don't have anything positive to say, don't post.

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Replying to peterdell:
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By Wanderer
17th Jan 2020 17:32

You don't think it's relevant to the trading v CGT thought process that the records were acquired in the 80's and are being sold now? It's a very relevant fact, that you didn't disclose in your question. One that chicken farmer couldn't have known when they posted their response.

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Replying to Wanderer:
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By peterdell
17th Jan 2020 17:55

No its not relevant. The original post stated its was a collection over several years. Which decade it was in has no bearing for trading or CGT, because you are selling off a collection, a pre owned asset. The concept of supervening trading is interesting though.

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Replying to peterdell:
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By Wanderer
17th Jan 2020 18:18

The we'll agree to differ. I feel it is very relevant that the length of time held before starting to sell could be very relevant to argue towards CGT rather than trading.
Few quotes from:-
https://www.accaglobal.com/my/en/technical-activities/technical-resource...
The length of time an asset is held is an important indicator of trade. The longer the period of ownership the greater the chance of it been seen as an investment rather than a trade.
‘pride of possession’ assets that generate no income.
personal assets
profit seeking motive
interval of time between purchase and sale

still you clearly know best.

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Replying to Wanderer:
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By peterdell
17th Jan 2020 18:46

I know the badges of trade, you don't need to list them.

Here's a question for you. If I set up a sole trader business and I transfer my personal assets into the business as stock what value do I bring them in at?

I always believed it was market value. Is that right? Chickenfarmer or anyone please feel free to reply to this as well?

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Replying to peterdell:
Psycho
By Wilson Philips
17th Jan 2020 19:00

Although the value point might be relevant to the question of whether a trading profit arises it is not relevant to whether a trade exists.

I agree that the timing of acquisition is very relevant. “Several years” could mean 2016 to 2020. While hardly conclusive on its own, it would be more likely to point towards trading than would purchases 30 years ago.

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Replying to Wilson Philips:
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By peterdell
17th Jan 2020 19:08

Sorry I don't understand. What I would like to know is this. If it was deemed my client had commenced trading by starting to sell his record collection today, purchased decades ago, what value do i bring this in at to the accounts? I believed it was market value (because the trade has only started today) yes or no?

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Replying to peterdell:
Psycho
By Wilson Philips
17th Jan 2020 19:26

I was responding to your claim that “Which decade it was in has no bearing for trading or CGT”

I consider it to be very relevant.

You appear to be brushing that point to the side on the basis that it doesn’t matter to the end-result anyway.

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Replying to Wilson Philips:
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By peterdell
17th Jan 2020 19:32

No I am not brushing it away. Why are you not answering my question?

My record collection from yesteryear I start selling it today, if you are saying its trading what value do I bring it into the sole trader accounts. I suggest that i would bring it in at market value. Please answer this question and then I will wrap whole conversation up? Why are you all so afraid to answer the question?

Unfortunately I am off to see a client so it wont be until later tonight.

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Replying to peterdell:
Psycho
By Wilson Philips
17th Jan 2020 19:39

Tell you what - deal with the other point first, which was discussed first, and I’ll consider answering your question. If we can’t agree that the timing of acquisition/length of ownership is relevant there’s no point in discussing the rest.

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Replying to peterdell:
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By Wanderer
17th Jan 2020 19:37

peterdell wrote:

I know the badges of trade, you don't need to list them.

Maybe, but you don't appear to understand their relevance.
Not going to get involved in your subsequent question, you give the appearance of just trying to bait. Perhaps get somebody you can trust to read over your posts? Both here and on other threads.
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Replying to Wanderer:
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By peterdell
17th Jan 2020 19:49

Answer my question. The reason you don't want to, is because you either don't know or you realise your position is wrong.

I was going to highlight how absurd it was but you won't answer my question. If you are not intending to post again I will stick with the intelligent posts of lionofludesch and SteLacca.

Thanks for contributing.

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Replying to peterdell:
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By Wanderer
17th Jan 2020 19:58
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Replying to peterdell:
RLI
By lionofludesch
17th Jan 2020 20:10

peterdell wrote:

Answer my question. The reason you don't want to, is because you either don't know or you realise your position is wrong.

I was going to highlight how absurd it was but you won't answer my question. If you are not intending to post again I will stick with the intelligent posts of lionofludesch and SteLacca.

Thanks for contributing.

This is the new non-sharp peterdell, is it? More like the Spanish Inquisition.

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Replying to chicken farmer:
Psycho
By Wilson Philips
17th Jan 2020 12:54

If he had an eBay trader account that wouldn’t help, but otherwise where would you suggest selling unwanted personal items?

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Replying to chicken farmer:
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By The Dullard
17th Jan 2020 13:35

I couldn't agree less. You're confusing yourself with the bog roll and parachute material cases, where a large quantity was purchased in a single transaction, I think.

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Replying to The Dullard:
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By chicken farmer
17th Jan 2020 14:28

The point I was making was that, even though items might be acquired without any intention of resale, subsequent disposals can be trading if there is evidence of a previous change of intention - the supervening trading concept - see the remarks of Megarry J in Taylor v Good.

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By Paul D Utherone
17th Jan 2020 12:58

More likely a chattel than a wasting asset I should have thought.

I'd agree with lion at probably not trading (depending why he bought them in the first place).

Selling now on eBay & quantities sold should not necessarily be indicative of a change.

I have loads of CD's that I bought for personal enjoyment (not the hope or expectation that they would appreciate in value, though a few have). I had too many and didn't listen to a lot (bought in second hand shops because they looked interesting and maybe turned out not to be) so I went though a phase of putting some on eBay and a few made more that a few £'s, but I would never have said that was indicative of my having started to trade in CD's

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Replying to Paul D Utherone:
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By peterdell
17th Jan 2020 13:04

This is the route to go down. Sorry I have more returns to do. Appreciate the advice. You will have to educate me one day as to the difference between a wasting asset and Chattel, I always thought a chattel was a wasting asset, but not the time for this.

KR
Pete

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Replying to peterdell:
Psycho
By Wilson Philips
17th Jan 2020 13:30

A chattel can have a life of more than 50 years so not a wasting asset. But potentially exempt under the £6k rule - see my other post.

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By SteLacca
17th Jan 2020 13:19

I, too, vote non-trading, though I'd be considering if a CGT liability arises.

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Replying to SteLacca:
Psycho
By Wilson Philips
17th Jan 2020 13:33

There was a similar discussion a few months ago. Unless any of the records are worth more than £6k each (and some may well be) the chattels exemption should cover most. If not, there is always the wasting asset exemption to consider. Most of my vinyl is less than 50 years old and already pretty wasted.

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Replying to Wilson Philips:
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By peterdell
17th Jan 2020 14:09

Hi Wilson Philips,

Thanks for the update much appreciated and that subtle distinction.

Hi SteLacca,

Thanks for your reply once again you are a star.

This is what I have gone with in the Tax Return. I don' think this is trading income as per replies and my initial thoughts, and chattels exemption under CGT. Again if HMRC make enquiries I will post the outcome.

Interestingly there are records that sell over 6k it would be interesting to know whether HMRC believe these are a wasting asset or a chattel. I suspect the collector item records are like stamps and therefore would come into tax over £6k.

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By AnnAccountant
17th Jan 2020 15:27

Blimey, Peterdell (the OP) is being quite sharp with people considering he was the one who asked a basic question.

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Replying to AnnAccountant:
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By peterdell
17th Jan 2020 16:23

I don't think so. If you want to assist in an interesting discussion around trading then great, if not don't post. I help people where I can and they help me. Why are you trying to cause a problem, its actually quite sad.

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Replying to peterdell:
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By Accountant A
17th Jan 2020 16:16

peterdell wrote:

Your so clever!!!!!!!!!!!!

It's "you're".

;)

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Replying to Accountant A:
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By peterdell
17th Jan 2020 16:24

Noted, but I was changing the post anyway, I don't want it to be inflamatory just wanted a discussion around the question.

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Replying to peterdell:
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By whitevanman
17th Jan 2020 16:48

I'm not clever, so please don't judge me.
Hard though you may find it to believe, I have several friends (that's a lie) who each have amassed record collections. One has been a collector since the 1960's and has recordings stretching back to the 19th century. He buys a wide range of collectables, old and new, which he sees as investments. Another started his collection in the early 1970's when he started out as a DJ. The records have been used in that trade since. A third is a music nut with a very eclectic collection built up for her own use.
The answer to your questions would be different for each of these. The "records" could include many different types of item from wax cylinders to data downloads. Also, they may not be wasting assets in the hands of each.
I trust you understand why the OP did not, despite what you assert, give all the relevant facts to allow a definitive view.
That said, most seem to assume that this is just a music fan who has bought records over the years for his/her personal enjoyment. If that is correct the answers already given (and your proposed treatment) cover it.
The only residual question (as far as I can see) is that of whether the records are wasting assets. In the hands of the collector, the answer might be "No" but in the hands of the ordinary music buff, it is likely to be "Yes" because at the time of purchase no-one would expect the useful life to exceed 50 years.
As ever, there are no simple questions or answers!

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Replying to whitevanman:
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By peterdell
17th Jan 2020 17:24

I was quite happy to provide the detail, there is no tax dodge or attempt to mis-categorise a transaction, (and you get a feel that this how it is viewed when you post a question) there is not enough information on the web to come to informed decision. I looked on Aweb and Taxationweb and I couldn’t find anything so I thought it would post a simple but interesting question as a diversion from the Tax Return woes.

It’s a shame because Chicken Farmer has come up with something, that would be of interest to many accountants and I don't think it is commonly known.

Megarry J in Taylor v Good.

If you then look at BIM20315

https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim20315

By that interpretation then almost anyone on E-bay is trading because there is an intention to make a profit when you start selling. The concept of Supervening Trading who new! (possibly all of you)

On the other hand I would assume that you have to value the items coming into the business at the date the trade begins and this would come in at market value. In my case its not relevant because sale and cost would match off, but for other transactions that could be very interesting.

I apologise if I come across as sharp its not intentional.

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Replying to peterdell:
RLI
By lionofludesch
17th Jan 2020 17:46

Still don't see this as trading.

Megarry would have you trading when you sell your own house at a profit. I doubt if he had such a blanket coverage in mind when he made the comment to which you refer.

And - please - don't ask me to believe all I read on HMRC's website. It's what they think. It's not necessarily correct.

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Replying to lionofludesch:
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By peterdell
17th Jan 2020 18:04

Despite the discussion I don't either and I have already sent the Return to the client on that basis. Ultimately if you amass a collection over a number of years and then you sell it, this is capital.

There is £25k this year, possibly £30k for the next couple of years. Don't want to get it wrong, and because he is also an online trader of other products the waters are muddy, particularly if he was start buying selling records (because he has knowledge).

I have told him to separate all these activities. Never knew about Supervening Trading though.

Thanks for your help by the way.

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Replying to peterdell:
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By whitevanman
17th Jan 2020 19:12

Before placing too much reliance on the comments of Megarry J, you should read the decision of Russell LJ in the same case in the CoA. It might better aid your understanding!
Like others, I would suggest that the sale of the collection in multiple lots, over a period of time, is unlikely to amount to trading but as I say, Russell has comments on existing activities that might be helpful/informative.

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Replying to whitevanman:
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By peterdell
17th Jan 2020 22:22

I wasn't. I have been saying its capital all along and how absurd it would be to be trading. Think of it from the other side. If I have an asset lets say a stamp and its worth a lot, I cant sell a few other stamps in my possession and then claim I am trading it would be ridiculous. The Revenue would never accept it. Pre-owned assets which are not purchased with the purpose trading have to be capital and the idea that J Megarry has any value is just a red herring. I couldn't be definitive when I posted but now I can be.

Your absolutely correct posting on here was a stupid thing to do should have learnt lessons from years ago. Doing the same thing over and over and expecting a different outcome expecting sensible polite conversations never going to happen.

Its a forum for people with an over inflated sense of their own ego's

Thanks and Bye

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Replying to peterdell:
Psycho
By Wilson Philips
17th Jan 2020 23:50

Close the door on the way out - your attitude will not be missed, being without doubt a major contributing factor to the lack of politeness in this discussion.

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Replying to peterdell:
RLI
By lionofludesch
17th Jan 2020 23:32

Jaysus - what a pompous, self righteous windbag.

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Replying to lionofludesch:
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By whitevanman
18th Jan 2020 10:47

Waste of time pointing out why, even his latest post is still wrong then! Nice guy!!

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By chicken farmer
18th Jan 2020 11:05

Oh Dear! Peterdell seems to have stormed off in a paddy and just before I was going to cast some more pearls before him. However just in case anyone is still interested in this topic, here they are;

1. As will be noted from BIM, for the Revenue to successfully claim that the sales are trading, there has to be demonstrable evidence of a change of intention prior to the sales (i.e. from holding as a capital item to holding as trading stock). So, important facts would be when was the decision taken to start selling off the collection and, perhaps more importantly, what was the motive behind that decision?

2. I believe it is the date of that change which determines when the items are to be valued, not the dates on which the sales were made.

3. Whilst no-one is obliged to believe the Revenue's manuals, remember that their staff are. So advisers (and their clients) need to be aware of possible Revenue challenges, even if they never materialise – the concept of protecting your backside.

4. In later postings Peter indicated that sales over last year,the current year and next year will total around £85K. Might that not raise a few eyebrows in the Revenue?

5. Peter has only now told us that his client is engaged in selling other items online. I would be concerned that the sales of these records might be regarded as part of the trading receipts of that online business. Marson v Morton ?

6. And then there maybe VAT to consider?

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Replying to chicken farmer:
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By whitevanman
18th Jan 2020 11:16

These are some of the points hinted st in my last post. Maybe Peterdell will read them when he gets the enquiry notice. Then again, maybe he already knows it all.

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Replying to whitevanman:
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By chicken farmer
18th Jan 2020 11:28

In the words of Paul Simon, "A man hears what he wants to hear and disregards the rest".

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Replying to chicken farmer:
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By Tax Dragon
18th Jan 2020 14:52

The Boxer is quite fitting.

Being accused of being aggressive seems to have unleashed a huge amount of aggression in the man. I've not read the thread fully, but the rudeness was all one way that I could see.

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By MJShone
23rd Jan 2020 10:00

What a lot of responses for January! Don't know if anyone else has mentioned it - I've skimmed through the posts - but if (a) CGT is the right route and (b) the records are not wasting assets, I'd be thinking about whether the "sets" rule is relevant in relation to the £6,000 limit if someone buys several records. (S262(4) TCGA 1992)

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Replying to MJShone:
Psycho
By Wilson Philips
23rd Jan 2020 10:08

The sets rule would apply, IMO, only to boxed sets and similar. That fact that one is selling a large ‘collection’ of records (or any other group of assets similar to each other) doesn’t make it a set.

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Replying to Wilson Philips:
Hallerud at Easter
By DJKL
23rd Jan 2020 10:28

So, the Beatles singles box set (which I never bought) albeit pretty sure is not worth £6k.

There are actually very few records that are, "Yesterday and Today" (Butcher Cover- the Holy Grail for my Brother in law) is one per this list.

https://thevinylfactory.com/news/the-top-10-most-valuable-beatles-record...

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Replying to Wilson Philips:
RLI
By lionofludesch
23rd Jan 2020 10:47

Wilson Philips wrote:

The sets rule would apply, IMO, only to boxed sets and similar. That fact that one is selling a large ‘collection’ of records (or any other group of assets similar to each other) doesn’t make it a set.

I agree. For me, a set is something which can be completed.

A table and chairs might be considered a set. Add a sideboard and you might look at including that if it was of the same style. But not the three piece suite. That's a different set.

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Replying to lionofludesch:
Hallerud at Easter
By DJKL
23rd Jan 2020 11:15

What about those wonderful Ercol collections.

I believe one of my nieces is now collecting them- she started with the two chairs, which as children we sat on and the cushion seat flew off the highly polished wooden base with you onboard, and I believe has been trying to furnish her entire flat with them; could a sideboard be a set with chair/sofa or is the fact that the type of function is different negate?

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