Fine wine merchants and wine fund managers are expecting an influx of UK wine investors following the Government’s proposals to amend Capital Gains Tax (CGT) on non-business assets.
If the coalition does raise CGT rates to levels ‘similar to those applied to income’, it could mean a rise from 18% to 50%
The move could lead to sales of equities and second homes before the new rate comes into force.
The suggestion is that some of the cash raised from such sales will be channelled into zero-rated assets such as fine wine.
‘While the [tax] difference on fine wine and other financial assets was only 0% versus 18%, many investors felt it wasn’t worth it to set up a bond and gain the expertise needed for wine investment,’ says Jeremy Howard of Slurp Fine Wines.
‘But if that gap rises to 50%, we could see a new wave of UK investors coming into the asset class. Given the demand we’re already seeing from Asia, this will mean another leg up for fine wine prices.’
‘If CGT is going up, investors will quite sensibly look at alternatives that aren’t CGT applicable, and wine falls into that category,’ says Magnum Fine Wine’s Alan Rayne. ‘For wine investors, it can only be a good thing.’
Bordeaux Index’s Gary Boom agreed it would have a big impact on prices and the market. But he also pointed out that investors could end up liable for tax.
‘Bona fide collectors are exempt, but not if you’re seen to be actively trading wine. Anyone investing in wine really needs to take professional tax advice and ensure they keep accurate records of what they’ve bought and sold.’
Peter Lunzer, of Lunzer Wine Investments said investors should note that not all fine wines were seen as wasting assets. ‘For those that aren’t, there’s a £6,000 tax threshold to take into account.’
But he doesn’t expect the new government to change its rules regarding fine wine’s zero capital gains status. ‘I think the government is too busy with other things right now.’
Written by John Stimpfig