Buying Whiksy as an investment through a Limited Company

delermd1

Just looking for advice for anybody who may know on potentially buying whisky through my limited company to hold as an investment.

Rather than surplus cash sitting in the bank, I've started collecting 'rare' whisky (bottles, not casks).  Rather than buying these personally, and obviously having to withdraw money from the business as a dividend/wage, where do I stand on buying this through the business and holding on the balance sheet as an investment?

If allowable, where do I stand with capital gains/chattels etc when it comes to selling the bottles?  From research I've found information on whisky casks but can't seem to find anything relevant on whiksy bottles.  We are a Micro-Entity from an accounting perspective.

Thanks in advance

delermd1

Just to clarify also, this is an already established business which is currently trading in something completely separate to whisky.

Grumpy_chap

What is the timeframe that you imagine this whisky will appreciate in value?
By how much do you imagine that this whisky will appreciate in value?
How much will the appropriate storage to maintain the quality of the whisky cost?
How do you intend to realise the future gain?
What is your plan "B" if the whisky does not appreciate in value?  Or depreciates?

AIUI, if the Ltd Co. buys the asset, there is no capital gain when the asset is sold but the profit will be subject to corporation tax and then withdrawing funds from the business will be subject to taxation as salary or dividend, as appropriate.

delermd1

Thank you.

I'm looking to hold the whisky from anywhere from now to say 20-25 years when I look to retire, selling will all depend on the current value and whether it appears to be a good time, but the majority are for the long haul.

How much will also vary per bottle, some may only be small gains if they don't imporve as expected, some will probably be 10 x the initial value.

We will be looking to store them, covered by our contents insurance through our current insurers.

Future gain will obviously be the selling price minus the original cost - this was one of the areas in question though as I wouldn't be 100% sure through a micro entity as to how any year-on-year gains may need to be recognised, or whether you just recognise the gain upon sale.

If it fails to go up in value I can always drink it!!  Although I'm fairly confident that worst case scenario over the long term I'll get the cost value back, although I fully expect all the bottles to appreciate in value over time.

Thank you regarding the last comment, overall it may seem better to withdraw money now then, rather than incurring a corporation tax charge x amount of years down the line and then a personal tax charge on withdrawing the funds x years in the future.

Thanks again

Jeremy535897

It's a very interesting question. Money can certainly be made if you pick the right whisky. I enjoyed several bottles of Macallan Gran Reserva 25 years or so ago, that were dear then (maybe around £80 a bottle) but sell at £2,500 today. I wish I had bought more, but even 25 years ago it was hard to source.

The first question is to check the company's articles of association permit it to do this activity, and if not, change them. I suspect that HMRC would view the business as a trade, so corporation tax would be paid when the whisky was sold by the company, and tax would arise on taking the less successful whisky out of the company to drink, as well as taking out the profits from successful sales.

lincroft1710

One of the problems of buying now in the expectation of a large gain many years later is inflation. So a £100 bottle bought now, may well sell for £500 in 25 years time. But what you could buy for £500 in 2022 may well cost (say) £750 in 2047. So although a seemingly good profit, not quite as good as would first appear. 

daveyjp

Whisky inflation is currently far higher than the 10% reported figure.

I was in Edinburgh recently and as always failed to pass Royal Mile Whiskies, it always drags me in.

I was shocked that Diageo now expect punters to shell out north of £70 for a bottle of bog standard Oban 14 or Lagavulin.  A year ago they were about £50.

If i were in it for the long haul I'd seriously consider a barrel, rather than punting on individual bottles.  A friend has one 'sleeping' at the moment, coming up to ten years old.

Mistral001

Have you taken in the cost of getting a licence to sell alcohol?  

Bradden

Mistral001 said:

Have you taken in the cost of getting a licence to sell alcohol?  

I wondered about that too... would you need a licence this or would it be excempt as a B2B transaction?

TripleH

What about duty?

I'm assuming this is not a bonded warehouse transaction?

With a bonded warehouse my understanding is that you have none of the issues about duty or tax to pay until the whiskey leaves the warehouse.

This is a secured loan you are providing the producer but you just don't know the interest rate yet.

I don't see it as an issue for the limited company if in a bonded warehouse, although you may need to periodically revalue your investment over time.

Mistral001

I just came across this thread regarding the sale of vintage whiskey:

Selling late Father's whiskeys — MoneySavingExpert Forum