Concerned about Brexit? Wine away
Britain's vote to leave the European Union raises an infinite number of, at present, largely unanswerable questions. One of the most important of these (to my mind, at the very least) is: will I still be able to buy my favoured French and Italian wines at reasonable prices? The magnitude of this cannot be overstated.
Under EU law, there is a right to free movement of goods between Member States. Effectively, there is an internal market without borders and restrictions between participating states. In trading terms, it is as simple to lay our hands on some Kendal Mint Cake from Cumbria as to procure a nice Claret from France.
Will Brexit mean that Britain will have to admire the beauty of the common market from afar in the style of a medieval courtly lover, or will canny negotiations ensure that Britain will still benefit from free movement of goods within the EU? Only time will tell. However, irrespective of the repercussions of Brexit, investment in fine wine should still be considered by the discerning investor. The art of wine-making is not exclusive to Europe, after all.
Investment in fine wine is often touted as a tax-free investment. However, whilst fine wine can certainly be considered a more tax-efficient investment, there are a number of vital things to consider and it is important to bear in mind that the legislation in this area is not always clear.
What is fine wine?
The predicted life of the investment wine is key.
In general, wine is considered a wasting asset, that is, an asset with a life expectancy of 50 years or less. Thus if I sell a case of 10 bottles of Chardonnay for £20,000 which I bought from a trip to France some years ago for £5,000 then the gain of £15,000 would be exempt from capital gains tax if the wine had an estimated life of less than 50 years.
Even if I could not take advantage of the wasting asset exemption, I might be able to use the chattels exemption relief. So, if I was selling a fortified wine such as Port or Sherry having a longer life expectancy and not classed as a wasting asset then provided the sale proceeds are less than £6,000 then the gain will be exempt.
If I have several bottles (which are not classed as wasting assets) which form part of a "set" (say a case from the same vintage and vineyard) then a tax advantage could arise if I decided to sell a bottle from the set to the same person in a series of transactions rather than the whole set in one transaction (so if each bottle was worth less than £6,000, but as a whole set they were worth more than £6,000). To stop this there are rules which treat a series of disposals as a single transaction and therefore if the total consideration exceeds £6,000, the exemption is lost.
In short, wine can be a tax-efficient investment, principally if the investment is, all things considered, a wasting asset. But, given recent developments, perhaps go in search of an Australian, Chilean, or South African wine. Take heart: there is [life and] wine outside the EU.
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