Investing in wine has proven to be an excellent idea for most. It has demonstrated itself to be inflation and recession proof and many people now consider wine investment a viable alternative for their portfolio. It is, however, not tax proof.
The accounting firm UHY Hacker Young has been pointing out some of the tax consequences of investing in wine. Apparently, for whatever reason, many wine investors have been led to believe that inheritance taxes would be based upon the amount they paid for the wine and not a market value during the time of assessment.
Hacker Young has pointed out that this belief is in error and HM Revenue and Customs have released a clarification since. Still, many potential wine investors have the wrong idea about how the IHT (Inheritance Tax) will apply.
Wine investors should be very careful to know what they are getting into. Their perceived notion of what their investment might cost in inheritance tax and the actuality of it could prove to be costly. There is apparently literature out there that describes wine investment as a very effective IHT investment and that the HMRC treats it as if it were a wasting asset. This is not accurate.
For its part, the HMRC says that a good rule of thumb is to determine the current market value of all assets and to know that is the value they will use to determine inheritance tax liability, without exception.
The liability is based upon the value at the time the person dies.
Wine may be an excellent investment, based upon your personal financial situation. There is little doubt here that the difficulty in knowing about the tax laws is based in great part on the fact that wine investing has only recently become popular en masse and that it is a very unconventional type of investment.