Taxation & Wine Investments
One of the main advantages and attractions for investors with Fine Wine are the benefits regarding Tax exemptions. Below we have set out the principle rules set by HRM Revenue & Customs.
Income Tax: Provided Claret is held in the name of a private individual who is not a wine trader or dealer, under current UK taxation rules, it is considered by the Inland Revenue that no income as such is derived from the holding of Fine Claret stocks. If you keep the wine in bond, you also avoid paying VAT and Duty!
Capital Gains Tax: You do not usually have to pay income or capital-gains tax (CGT) on any profits. Wine is exempt from CGT because it is regarded by the Inland Revenue as a "wasting asset" with a predicted lifespan of less than 50 years.
Fine Claret is normally considered to be a "wasting asset" by the Inland Revenue, which is not subject to Capital Gains Tax. However, the following points should be considered:-
- Again, it is essential that the wine is owned by a private individual, who does not trade in wine.
- The definition of a "wasting asset" as defined by S.37 CGTA 1979, is "an asset with a predictable life not exceeding 50 years and, in relation to tangible movable property, life means useful life, having regard to the purpose for which the tangible assets were acquired".
- In our professional opinion, all the wines we offer will certainly have reached their peak of maturity within 25-40 years, and we believe it would be very difficult to argue that they have a "useful life" exceeding 50 years.
Inheritance Tax: The wine will form part of your estate for Inheritance Tax (IHT) purposes. The HMRC (Section 160 IHTA1984) states that "for Inheritance Tax purposes the value of any property is the price it might reasonably be expected to fetch if sold in the open market at that time". Therefore, it is clear that a wine cellar must be valued at its open market value for Inheritance Tax purposes at the time of the relevant occasion of charge (death).
At Bacchus Vintners, we only advise on which wines to buy. We do not offer financial advice, however we do advise our clients to seek this information from an IFA or HRM Revenue & Customs:
PLEASE SEEK ADVICE FROM YOUR ACCOUNTANT/FINANCIAL ADVISOR FOR YOUR OWN CIRCUMSTANCES - AS NOT ALL RULES MAY APPLY