As wine marketers know, there is never a lack of investors lining up to pay high prices for rare or older bottles of fine wine. We were recently reminded of that fact when a case of Château Petrus from 1998 was put up for sale. It tripled in value during the past eight years and broke all records when it sold for £26,822. Looking over the past two decades of wine sales, the 1998 Petrus was the third most expensive. According to Robert Parker’s 100-point scale, it won a rating of 98. At a recent Sotheby’s sale, Bordeaux wines from Petrus were again the top sellers when bottles of a 1990 vintage brought in £25,850. Part of the value of the wine derives from the estate where it was produced, and Château Petrus is one of Bordeaux’s most valuable estates.
Location is Everything
The 28 acres of vineyards at Château Petrus are located in Pomerol, an area in the southwest of France. Holding an international reputation for being one of the world’s best areas to produce wi
that it has earned its international reputation in a relatively short period of time. For instance, until the last century it was barely noticed but now its wines are more expensive than many of the more established Bordeaux estates.ne, it is not typical of other appellations in Bordeaux. Pomerol does not have its own classification system and it is not one of the wealthy châteaux in the midst of many others. It is unique in
Pomerol is located to the east of Bordeaux on the Dordogne River’s right bank. The highest percentage of grapes grown is Merlot, although there are some Cabernet Franc vines as well. Unlike the other appellations, Pomerol is not named for a town located in its region and it does not have an epicenter.
Other producers taking advantage of Pomerol’s excellent location are Lafleur and Le Pin.
The nature of the tax structure is a huge incentive when investing in fine wine and is one of the reasons that those investments are continually on the rise. According to “Liquid Assets,” published in the NewStatesman, a solid wine investment offers an affordable entry point, which of course is different for every investor. It should also represent sustainable growth in every aspect of the transaction, which includes the retail market, wine consumption and going to auction, which is extremely desirable in the wine market. Additionally, the wine investment should provide a straightforward but flexible and optimised exit plan. With all of these criteria fulfilled, the investor can expect profits exceeding the averages and possibly going way beyond.
Protecting Your Wine Investment
Wine merchants and brokers emphasize that once the wine is purchased it must be stored in bonded warehouses that are regulated by the government. When this is done, the wine will maintain its provenance and meet the qualifications for a purchases that is free of VAT and duties. Besides the monetary value, the specialised wine storage facilities also have the optimum temperature and environment for storing wine until it achieves the ideal maturity and is ready for market.
Wine as a Tax Free Wasting Asset
When the wine is ready, it can be sold according to HMRC’s wasting assets, which will be largely without payment of capital gains taxes. This can be read on Tax Bulletin 42 entitled “Wine and Spirits: The Capital Gains Tax Treatment.” According to the bulletin, a wasting asset is considered to be one with a predictable life span, referring to the time of purchase, of not more than 50 years. If the investor does want to sell a bottle of wine following the 50-year cutoff, it may still be considered tax free if the selling price for the bottle does not exceed £6,000.
So whether you’re a wine connoisseur or a savvy investor, there are great profits to be realised in wine investment.