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.