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Whisky investment - tax treatment

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Hi,

We have an existing client who is looking to take on a new business which sells whisky investments. As I understand investors purchase whisky in barrels which are held in bonded storage in the warehouse until the time comes when they either sell them or drink them. The company will also sell bottles/ casks separetely for drinking however I believe this is a small proportion of the income.

I believe any gains by investors will be CGT free but am interested in the tax and VAT treatment for the sales by the company. Presumably the sales of bottles will have standard treatment and there will be no duty payable as this is paid by the manufacturer, however the client believes there is no VAT due on the investment sale as long as this remains in bonded storage, however I can find no guidance on this. If so, would this be a zero rated sale or exempt?

Any other considerations?

Thanks in advance.

Replies (4)

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Hallerud at Easter
By DJKL
08th Apr 2020 12:32

http://www.yourwhiskycask.co.uk/good-to-know/

"All our casks are maturing in bonded warehouses in Scotland, so no VAT or alcohol duties need to be paid when purchasing a cask. If you sell a cask while it is still under bond, no VAT must be paid either."

Also see:

https://www.gov.uk/guidance/vat-and-tax-warehousing-notice-70210

https://www.gov.uk/government/publications/excise-notice-39-spirits-prod...

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Replying to DJKL:
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By littletosh
08th Apr 2020 12:30

Thanks. Do you think this would be a zero rated sale or exempt i.e. would the company be able to recover the VAT on their costs? Thanks.

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Replying to littletosh:
Hallerud at Easter
By DJKL
08th Apr 2020 12:47

You need Les Howard for a correct answer but my guess , and it is a guess, is there is possibly, for vat purposes, no supply made within the tax warehouse wrapper.

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By Tax Dragon
08th Apr 2020 15:15

Whisk(e)y is a popular subject on AWeb.

There was a question last year where someone was incorporating an investment in whisky. I can't find that one immediately, but DJKL was involved in the discussion (I'm not implying anything about a whisky connection and DJKL, honest) and might provide a pointer.

This https://www.accountingweb.co.uk/any-answers/investment-or-trade-in-whisky is worth a read - just an FYI, as presumably your client is not giving tax advice to (prospective) investors.

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