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investment or trade in whisky?

investment or trade in whisky?

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client wishes to buy stake in first cask with a view to selling most of the bottles in 10 to 20 years time - is this an investment or trade?

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Portia profile image
By Portia Nina Levin
13th Jan 2015 10:22

Is the client going to bottle it

And sell it himself. Has he got a liquor licence?

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By nick farrow
13th Jan 2015 10:51

thanks

apparently he instructs the company to sell it

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Portia profile image
By Portia Nina Levin
13th Jan 2015 11:02

And I imagine

That he instructs them to sell it when they advise him that the time is right. It is a bit like sponsor a snow leopard; it is never really YOUR snow leopard; you cannot put your hand in its basket and give it a stroke! Your client is sponsoring a cask of whisky.

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By nick farrow
13th Jan 2015 11:08

thanks

that maybe why he's pulled out - but nevertheless I'm intrigued as to how the income is taxed

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By nick farrow
13th Jan 2015 16:05

many thanks Portia

exactly what I was looking for

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By mydoghasfleas
14th Jan 2015 12:23

Not quite that easy

Whisky at cask strength is normally about 65% ABV.  Whisky at bottle strength is normally 37.5-40% ABV.  So there are the processes of dilution and bottling involved. 

If he is involved in the decisions involved in that process the answer may be different to if they are not.  If he is buying a cask to resell as a cask, it would more likely be an investment but there could be arguments for trade.  There may be adequate here to distinguish from fine wine although that does not mean it applies.  It's interesting on a number of questions, chattels, wasting assets and process.

You presuppose an answer by asking how the income is taxed when your question is really, "is it income or a gain?"

Nonetheless, I think the wisdom of not entering into the transaction is important.  Clearly there is a broker involved in what is probably some unregulated scheme (scam?) where short of regularly checking the asset exists and is still in bond, for which storage charges will be involved, you have no certainty the whisky exists now let alone in 20 years time.  The only person likely to make any money is the scheme promoter.  Not a tax answer you might want but, in 15 years time, had the client proceeded, you would probably ask, "how do I calculate the loss and, if there is an allowable loss is it against income or gains?"

 

 

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By nick farrow
15th Jan 2015 11:42

many thanks Mydog

thanks for that amazing detail - he would be better off investing in the new pensioner bonds released today from the sound of it

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By Montrose
13th Aug 2019 15:54

Leaving aside the question of unlicensed dealing in spirits, it is difficult to see what the purpose of the original acquisition [possibly excluding the legal settlement acquisition]could have been other than the acquisition of a trading asset. I suspect the legal settlement barrels would fall into the same analysis, as the question is not the consideration for the
acquisition, but its purpose.

So we have a simple, if uncomfortable situation, because a disposal to whomever would give rise to an income tax gain, although that may be deferred by an election under TCGA s161(3) .
Valuations and computations at all dates will be required- no separate valuation required in respect of the "angels' share".

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