Tax Benefits for Fine Wine
The tax treatment of wine is an unusual one and based on the assumption that wine is bought predominantly for consumption and that left for extended periods of time would become undrinkable. For this reason, wine falls under the 50-Year Rule (it has a predicated useful economic life of less than 50 years) and is deemed to be a Wasting Asset by HMRC.
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.
Fine wine is regarded as one of the last remaining tax-free areas where private individuals can experience an exemption from Capital Gains Tax. Although this can be open to interpretation the tax treatment depends largely on how the wine is bought and sold.
Due to individual tax positions and constant changes within tax legislation we suggest you speak with your personal tax consultant or accountant regarding this and your own tax circumstances.
Duty & VAT
All wine is subject to Import Duty and VAT; however, the liability for this remains suspended whilst the wine is held under bond in an HMRC-regulated warehouse. Should you choose to remove your wine from bond, the Duty and VAT will become payable at the prevailing HMRC rate at the time of removal. This is charged directly to the owner by the bonded warehouse on behalf of HMRC before the wine can be released.
Wine sold in bond is not subject to Duty or VAT as liability for this remains suspended, once sold the liability for such passes to the buyer or new owner.
Import Duty is calculated per litre, which may vary according to HMRC rates at the time of removal and VAT is based on the purchase price of the wine, not the current value.
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