Tax advice of the week: Buy wine
Jun 18, 2010
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If you are a higher-rate taxpayer and want to avoid tax on your investments, buying wine is a pretty good option, says Nathaniel Litmann in The Schmidt Report. As long as the wine you buy is considered a wasting asset (i.e. has a useful life of 50 years or less), it won't attract either income or capital-gains tax when sold for a profit, provided the seller is not judged to be engaged in trade.
The reason for this is that "HMRC is reluctant to classify private sellers as traders as it will mean that all associated costs and losses will have to be taken into consideration thus reducing the short-term tax take".
As an investment, "wine has much to recommend it". The greatest producers can only make a finite quantity and as supply diminishes, prices rise. The safest and most secure investments are French wine from the leading 30 chateaux.
"Over the medium to long term a well-balanced wine portfolio should offer returns of 10%-12% year – better than the FTSE 100." And if any bottles don't rise in value, you can always drink them.