Investors are seeking out tax-efficient ‘safe-haven’ investments as jittery markets respond to the current economic challenges. Former Chancellor, Sajid Javid made his resignation speech to the Commons today with pointed reference to the “Cummings and goings” of the current internal politics of the Conservative party. Boris Johnson’s new Government’s first Budget is just two weeks away and will be delivered by Javid’s replacement, Chancellor Rishi-Sunak on the 11th March, 2020.
We are seeing daily evidence on the media on where the UK desperately needs to see this new Government stamp its mark and make a difference. Bold statements and big ideas about investment in social care, NHS, education, bridging the North / South divide with key infrastructure projects, energy and now evidently, flood defences – although there seems to be some reticence from Johnson on commenting about this.
How is all of this to be afforded? A healthy economy of course – oh for a crystal ball – Brexit trade uncertainty will hang like a dense fog over us for the remainder of 2020 at least. The tax-shy Tories are unlikely to touch the key cornerstones of the tax landscape, but there may be some movement impacting high earners. A reduction in Pension Tax Relief for those with incomes over £50,000 has been muted, we wait to see how creative the new Chancellor will get with tax.
We seem to be lurching from one natural disaster to another at the moment of almost biblical proportions, all of which have both personal and economic costs. The floods witnessed this past week in the UK have been devastating for many and there is no doubt these areas must be afforded better protection against the now regular effects of global warming.
COVID 19 is already demonstrating its human cost in China and the Far East and is now making its presence felt in the West with a wave of cases emanating out of Italy seeing hotels and schools being shut down. Major events which stimulate global travel, and in particular for visitors from regions suffering the disease, are being cancelled. The Six Nations Ireland v Italy fixture will not now go ahead and there will be questions about the England v Italy game, further sporting and business events in HK have already been postponed including wine industry conferences and auctions. The impact on companies and the global economy is already being felt only several weeks since the first cases hit the media.
This all brings us back to how can an ambitious Budget be afforded and how does that effect the individual investor. In times of economic challenges it is important to have a diversified portfolio, to be able to ride the rough with the smooth. Equities have had a good couple of years but Coronavirus has had global markets sneezing this week. Stable assets such as gold and fine wine have been traditional safe havens when financial markets are challenged, and fine wine has the additional benefit of an advantageous tax treatment. HMRC’s classification of fine wine as a ‘wasting asset’ generally means (subject to personal circumstances) any gains made will be CGT exempt. For more information get our Special Report on the Tax Treatment of Fine Wine.
The timing for entering the fine wine investment market as a new investor or adding to an existing portfolio is opportunistic right now. It is a “Buyer’s Market” for top Bordeaux wines and even some Burgundies. US Tariffs imposed in October 2019 and a correction last year in a rampant Burgundy trend means there are some blue-chip investment wines offering value. Rare vintage Champagnes and Italian wines are also enjoying strong demand and contenders for growth as they currently remain exempt from the new US Tariffs.
So with the end of this tax year fast approaching and a new Budget regime imminent, understanding the tax benefits of a stable investment like fine wine is key.
For more information on diversifying a portfolio with fine wine talk to a member of our specialist wine investment team on 0203 384 2262.