Tax Benefits for Whisky Collecting
How assets are taxed is important for any collector or owner and knowing what tax benefits are available on whisky is particularly relevant if you’re thinking of diversifying your portfolio. Fortunately, there are many tax advantages for whisky collectors as whisky is considered to be a Wasting Asset, according to HMRC rules.
Capital Gains Tax
Capital gains tax is levied on the profit earned by an individual or business from the sale of an asset that has appreciated in value over time. The tax is calculated on the difference between the sale price and the purchase price, and it is designed to ensure that individuals and businesses pay their fair share of taxes on any capital gains they may earn.
When you collect cask whisky, it isn’t typically liable for Capital Gains Tax (CGT) because it is a Wasting Asset. As the whisky evaporates at a rate of 1-2% per year, HMRC considers it to have a lifespan of less than 50 years. As a result, collectors aren’t required to pay CGT when trading cask whisky.
However, if you choose to collect bottles of whisky, rather than cask whisky, you could be liable to pay Capital Gains Tax as these are not generally considered to be a Wasting Asset.
Duty & VAT
Cask whisky is typically subject to both Import Tax and VAT but, if the whisky is held under bond at an HMRC-regulated warehouse, the liability for these taxes is suspended. Providing the whisky remains under bond, the owner doesn’t become liable to pay either Import Tax or VAT on it. Furthermore, the whisky does not become liable for Import Tax or VAT if it is sold in bond, as the liability remains suspended.
If you decide to remove your cask whisky collection from an HMRC-regulated warehouse, Import Tax and VAT will be charged at the rate set by the HMRC at the time of removal. Similarly, if cask whisky is bottled, you will need to pay Import Tax, VAT, and relevant bottling charges.
Tax rates, regulations, and liabilities change on a regular basis, so it’s always advisable to seek advice from a specialist tax advisor before expanding your portfolio. While cask whisky collections do offer certain tax benefits, understanding how whisky taxation works is essential for any collector and our in-house whisky experts are happy to answer any questions you may have.