How Whisky Investment Works
Learn more about the process of how whisky investment works before getting started
What are the costs of investing in whisky?
So, how does whisky investment work? Cask whisky investment is low cost, hassle free and very secure. Bound by a rigid set of HMRC rules, casks of single malt whisky have to remain within the boundaries of Scotland and in an HMRC bonded facility. There are literally hundreds of bonded warehouses in Scotland, providing vital income to many rural areas of Scotland. Many of our casks will be stored at the bonded facilities owned by the distillery that produced the cask, but not always. Often distilleries will spread their casks across a wide range of distilleries and warehouses ensuring that they mitigate any risk of fire damage, for example.
The cost of warehousing a cask can vary dependent on the prestige and location of the facility. However, the typical cost will be around £40 per cask, per year. This is the only cost attached to the cask and is payable from Year 5 onwards of your investment duration- we cover all costs for the first 5 years .
Comprehensive insurance cover for all casks is held by Highland Cask Group Ltd indefinitely. Our policy cover is for up to £10million on any one incident and all casks, including those belonging to our clients, are covered against fire, theft, natural disaster and accidental damage. The cost of this insurance is covered in its entirety by Highland Cask Group indefinitely.
Performance Related Fee
Most investment houses that manage assets belonging to clients will charge a fixed yearly fee, regardless of the outcome of the investment. At Highland Cask Group we take a different approach – we manage your asset on an open-ended basis and charge no yearly fee.
Instead, Highland Cask Group Ltd are contractually obliged to take 10% of any profits made on the cask at the end of the investment period, whenever that may be.
The greater the profit we make for the client, the bigger our commission at the back end and so we are incentivised to generate as much profit as possible for our clients.
Duty, VAT and Taxation
We always advise on getting your own independent tax advice, but the following might be useful:
- Highland Cask Group Ltd hold a WOWGR license. The term WOWGR stands for Warehousekeepers and Owners of Warehoused Goods Regulations. A certificate obtained under these regulations allows a business to move goods with the payment of duty suspended from one bonded warehouse to another. It is a very difficult licence to obtain, accessed after rigorous interviews and strict conditions.
- All cask whisky is held under bond in Scotland and as a result is exempt from VAT. At the point at which you decide to bottle and the cask is to be removed from bond, excise duty and VAT will be due. Ordinarily the cask will be brokered on whilst still in bond and therefore not subject to these taxes.
- For UK tax payers, UK Capital Gains Tax is not regarded as being applicable because cask whisky is a “wasting chattel” as a result of the “angel’s share” (evaporation).
Illustrative Example of Costs
Indicative figures to show how the above costs are calculated:
Mr Smith invests £10,000 in a single cask of Scotch single malt in 2020
He sells the cask through HCG Ltd for £15,000 in 2023
HCG Ltd’s commission would be 10% of the £5,000 profit generated, equalling £500
RETURN ON INVESTMENT
Mr Smith would therefore receive £15,000, minus £500 (HCG’s Ltd commission), equalling £14,500
The £4,500 profit is exempt from CGT owing to its ‘wasting asset’ status*
*Our advice is always to consult with your own independent tax advisor.
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