4 October 2010
Titles that covered this article include the Financial Times, 5 and 9 October 2010, the Sunday Times, 10 October 2010, and Accountancy Age, 5 October 2010.
- Investing in wine increasingly popular in planning for inheritance tax
Investors in wine are building up huge unexpected tax bills as they have been misled over HMRC’s tax treatment of wine, warns Mark Giddens, partner in our London office.
HMRC has recently warned that there is an increasingly widespread misunderstanding that the value of wine investments for Inheritance Tax purposes is based on the price the wine was bought rather than its current market value.
With investment quality wine increasing in value over time, the difference between what investors believe would be paid in Inheritance Tax (IHT) and what should be paid is potentially huge.
Our partners have also seen sales literature for wine investments incorrectly claiming that wine is a very IHT efficient investment and that HMRC treat wine as a “wasting” asset and therefore only value it at cost.
Mark states: “Tax law is pretty clear on this point but wine investments are sometimes made in a very salesy and high pressure environment and good salesmen always sound plausible – some may not even know they are giving incorrect tax advice.”
“HMRC will be watching closely for this – it is part of a general trend for HMRC to clampdown on IHT evasion.”
The problem has grown with the increase in the popularity of wine as an alternative asset class.
Interest in wine accelerated further after the weak performance of many conventional asset classes during the recession. Fine wine prices are also expected to increase because of a forecast growth in demand from Asia.
Executors of wills, who are often a relative of the deceased person, could face a penalty of up to 100% of the amount of tax lost by Revenue & Customs if they file an incorrect IHT return.
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