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Now “dry January” has come to an end, a good bottle of red is surely featuring higher people’s minds. With 20% VAT, plus excise and customs duties, the indirect tax implications can be substantial.

Where a business imports wine to the UK, customs and excise warehousing can be used to suspend the payment of VAT and duty until the wine is bought into “free circulation” e.g. drunk. This gives a great cash flow advantage, but if the wine remains in the UK ultimately taxes still need to be paid.

However, the beady-eyed advisor may note that “collectors’ pieces” benefit from 0% customs duty and a reduced effective VAT rate of 5%. A potentially massive saving! So could wine be considered a collectors’ item of historical or ethnographic (cultural) interest?

Precedent comes from the decision in E Daiberv Hauptzollamt Reutlingen, identifying five criteria for classification as a “collectors’ piece”. So perhaps we can consider the recent sale of three bottles of Chateau Lafite 1869 (for a bargain approx £500k), in light of these specific criteria:

1. Possesses a certain scarcity value: Chateau Lafite has a small output and not many will have survived since 1869.

2. Not normally used for their original purpose: Given the article informs us there’s “a likelihood that at least one of them may be opened and drunk”, this suggests the majority of the bottles would not be used for their original purpose.

3. Subject of special transactions outside the normal trade in similar utility articles: Most wine is sold in shops, collectors’ items are generally sold at auction.

4. Of high value: Fairly self evident.

5. Illustrates a significant step in the evolution of human achievements or a period of that evolution: Perhaps of more debate but there is apparently huge interest in “pre-phylloxera vintages” and I’m sure many a wine buff would happily argue the cultural value of certain wines.

I leave this for you to decide the appropriate tax status…

by Pete Sanderson

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