Budget headlines for wine investors ahead of the Finance Bill this week

The March 2016 budget, which sets the UK tax landscape for the fiscal year 2016/17, was delivered by George Osborne in his familiar “big picture” style and was predictably short on fine detail. His understated presence was somewhat overshadowed by the vision that was Theresa May but his ability to deliver a robust speech was never in question.

The content of the budget and the detail that followed in the press releases contained few surprises on the day. In fact the after-effect has more notably been centred on IDS’ departure and how the Conservative Party will now handle the political hot potato of welfare reform and how far they can afford to take it; a U-turn already happening with his replacement. Otherwise we will need to wait for the Finance Bill due on 24 March before comfort can be taken that nothing has slipped through unannounced in the fine detail.  The Chancellor made significant references to strengthening the fight against tax avoidance/evasion particularly by large global corporates and as a result I do suspect the Finance Bill to contain some surprises over and above that already published.

The Budget made no obvious references to matters that would affect the tax efficiencies afforded by a properly managed investment in fine wine.  However the reduction in Capital Gains Tax rates from 28% to 20% and the extension of Entrepreneur’s relief, (access to a 10% rate of capital gains tax), for investments in unquoted companies held for three or more years are interesting developments for investors generally.

Subject to any unannounced changes being found in the Finance Bill there has been no change to the “wasting assets” or “chattels exception” provisions that usually mean the realisation of value from a liquidation of a fine wine investment is tax free. Traders in wine will always be subject to Income Tax if an individual, or Corporation Tax if a company or other corporate body.

So subject to HMRC taking a more aggressive view and claiming that active investors are trading I believe it to be unlikely that there will be any material change from a tax perspective in the 2016/2017 tax year for investors in fine wine.