Cask Ownership in the UK

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Phil Huckle

Purchasing casks of whisky is one of the few alternative assets in the UK that doesn’t attract any Capital Gains Tax (CGT). In this short article, we’re going to explain why purchasing whisky casks is not only tax efficient but very versatile. 
 
One issue that many people quickly discover is that the UK tax system is very complicated and rates across the board are much higher than in Hong Kong. For example income tax for high net worth earners is 45%, capital gains tax (CGT) can vary between 10-28%, plus there are property taxes, value added tax (VAT) at 20% on most purchases, and corporation tax at 19%.
 
Many people see property as their favoured form of alternative asset. However, there are drawbacks. Property purchases are not very liquid, you have to generally park large sums of money which can tie up a lot of your capital. Then besides the property taxes and the UK CGT, there can be a variety of other issues to deal with. These can include building regulations, bad tenants, repairs, rising interest rates (if you have a mortgage), insurance, council tax, renovations, etc. 

Conversely, whisky cask ownership is very easy, versatile, and low maintenance. Casks start at around £1500 for new make spirit and can rise to above £100k for the old and rare variety. Your portfolio strategy can easily be tailored to different budgets and timelines. At Cask Trade we can offer 5 different exit strategies to suit every single private whisky investment client. 

We provide a moving marketplace for trading and handling cask whisky, and unlike our competitors, we don’t just sell, we buy it too. We own all our casks, and we’re not brokers, we’re stockists. It’s important to understand the difference. We own all the casks we sell, giving you not only a 100% transactional guarantee, but also the peace of mind that we will manage, sample, and quality control from day one, giving your cask the care it deserves.

Below we explain why this form of alternative asset is very tax efficient.

The Casks – Scotch whisky casks sit in bonded warehouses in Scotland. These are secure areas that are duty-free and allow government officials to inspect the casks. The casks can be transferred between different bonded warehouses but in most cases, they will remain in the same one until it is time to bottle the whisky. It is at this point that the whisky incurs taxation. 

Wasted Chattel – As the whisky rests in these oak casks it evaporates at around 2% per year (referred to as the ‘angel's share’). Therefore whisky is an asset with a limited life span. The government refers to assets like this as ‘wasted chattel’ and thus they occur no CGT.

Ownership and Sale – In some cases, the cask will pass through several different owners before it is bottled. In many cases, one of the 1500+ independent bottling companies will purchase the cask when it is mature and the taxation incurred is thus priced into the final retail bottle price. For the private client selling the cask this asset remains free of CGT.

Summary - As a private client, you act as the caretaker of the cask, watching as it matures from, for example, three years of age until it is bottled, usually at one of the milestone ages of 10/12/15/18/21/25 years. Logistically it is very easy for the client, as the cask generally stays in its warehouse until it is bottled. The only thing that might change is the certification of ownership, with storage and insurance costs minimal.

Therefore, building up a portfolio of whisky investment is a very easy tax-efficient, and versatile way to own alternative assets here protected under UK law.

To find out more about Whisky Cask Investment Ownership, contact the Masters today.

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