whiskey aficionado Jay Bradley with casks of expensive whiskey

Are there capital gains on whiskey?

October 17, 2023

Every country has different laws when it comes to profiting on whiskey casks and the resulting capital gains tax. In the UK for example, it is possible that profits made on casks are exempt from capital gains tax as they could be considered a wasting asset. A wasting asset is defined ‘as any asset which has a predictable life which does not exceed 50 years,’ according to the HM Revenue & Customs (HMRC) Internal Capital Gains Manual. So, for a cask of whiskey to be considered a wasting asset, it must have a predictable life of 50 years or less. Additionally, the asset must be expected to physically deteriorate over time and can’t be used for any purpose other than the maturation of the whiskey. If these conditions are met, then the cask of whiskey would be exempt from capital gains tax.

Why is whiskey classed as a wasting asset?

Whilst under maturation, around 1 to 2% of the spirit inside the casks evaporates each year as part of the ‘Angels’ Share.’ Therefore, the typical lifespan of a cask is well under 50 years old, and the amount of whiskey left in the cask when you come to sell will depend on the duration of your term. These losses do not affect the value of your casks for insurance purposes as, with Whiskey & Wealth Club, they are insured for the full value of the initial purchase with yearly assessments and adjustments in line with the overall increases in the value as the cask ages.

Are there any taxes payable on whiskey?

Whiskey casks are stored in a bonded warehouse for the duration of their maturation. A bonded warehouse is a secure storage facility with government licence to hold goods tax-free until the goods are shipped out. This allows the warehouse keepers and managers to move goods between sites without incurring fees for each transfer. Instead, any applicable duties and taxes are deferred until the goods leave the warehouse for their final sale. So if you were to sell your cask in bond, there would be no taxes payable on the whiskey. However, if you chose to bottle your whiskey, once the cask leaves the warehouse, any applicable taxes and duties would be imposed, such as VAT and income tax.

Nevertheless, as with any asset, it’s recommended to seek advice from a tax professional to fully understand the tax implications within your specific jurisdiction.

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