Investors are being misled over the inheritance tax benefits of buying into wine and could face “huge” unexpected bills from HMRC, a national accountancy has warned.
UHY Hacker Young says wine is being touted as a tax planning tool, with wine investment firms saying its value for IHT purposes is based on the price it was bought at not its current value.
The warning comes after HMRC earlier this month stated it is “incorrect” that for IHT purposes wine cellars are valued at purchase price, in its August newsletter.
UHY Partner Mark Giddens says there can be capital gains tax exemptions on “wasting assets” like wine but these exemptions do not apply to IHT.
He says: “Tax law is pretty clear on this point but wine investments are sometimes made in a very salesy and high pressure environment and good salesmen always sound plausible – some may not even know they are giving incorrect tax advice.”
UHY Hacker Young adds that executors of wills, who are often a relative of the deceased person, could face a penalty of up to 100 per cent of the amount of tax lost by HMRC if they file an incorrect IHT return.
Unregulated collective investment scheme the wine investment fund says clients should always seek advice before investing in wine on the basis of tax.
Director Andrew della Casa says: “Tax planning is a complex area and we always recommend that our subscribers seek advice from their fiscal and other financial advisers if in any doubt as to how they should proceed before making an investment.”