Throughout the recent recession wine has proved to be a huge investment… there is always great pleasure in drinking it and, as investment companies have said, is a very Inheritance Tax efficient investment.
However, tax advisors have sent out a warning to wine investors that they may have been misled by wine dealers and investment companies and they could be facing huge tax bills.
It is believed that wine dealers have misled prospective investors by claiming, incorrectly we might add, that the value of wine investments during inheritance tax (IHT) assessment is based on the price the wine was bought at, rather than its current market worth.
HMRC did issue a clarification over this but it seems that many investors may still be in the dark meaning that, with investment wine increasing in value over time, the difference between what investors believe should be due in IHT and what should actually be due, is set to be huge.
HMRC have singled out sales literature for wine investments that claim wine is treated by HMRC as a ‘wasting’ asset and therefore is only valued at its original cost.
The problem seems to be that many of the salesmen flogging these investments don’t even know they are giving bad tax advice.
That isn’t an excuse though and HMRC are bound to be looking closely for this in their efforts to clamp down on tax evasion.
A spokesman from HMRC issued the following statement in connection with the issue:-
“When valuing the deceased’s estate, find out the market value (a realistic selling price) of all of the assets at the time of death. All assets for inheritance tax purposes are valued on the date someone dies, and there are no exceptions I can think of.”
All executors of wills should be extra vigilant and make sure they receive advice from a tax professional, and not just rely on tax advice from salesman.
If you file an incorrect IHT return, no matter if you relied on advice, you could face a penalty of up to 100% of the tax lost to HMRC.