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Tax Compliance

Taxation of wasting chattels: A focus on whisky casks

Taxation of wasting chattels: A focus on whisky casks
Simone Lyons

By Simone Lyons

29 Apr 2022

In a recent webinar hosted by VCL Vinters, Assistant Tax Manager, Simone Lyons, discussed the tax implications and laws with regard to whisky casks. 

What is Capital Gains Tax (CGT)?

Capital Gains Tax is a tax on the increase in value of an asset between the time it is acquired and the time it is disposed of (or deemed to be disposed of).

As its name implies, this is a tax on capital gains. It, therefore, is not charged on gains that are assessed to either Income tax or Corporation tax.

In the UK CGT is charged on capital gains made during a tax year and every individual is entitled to an annual exemption which for 2022/23 is £12,300.

The three components needed

In order for there to be a chargeable gain there needs to be all of the following:

  • A chargeable person – This is someone resident in the UK.
  • A chargeable asset – This includes all property whether located in the UK unless specifically exempt.
  • A chargeable disposal – This occurs when ownership changes, whether by sale, exchange or gift.

Calculating Capital Gains Tax

The Date of disposal is when a contract is made, usually, the point money changes hands.

The Proceeds are the actual amount received, if the asset was received as a gift, the proceeds will be the market value at the time of transfer.

The cost is the actual amount paid when the asset first came into possession. If the asset was received by way of inheritance, the cost will be the value included as part of the estate, so usually higher than the original cost.

There are a group of assets that have a special tax treatment- these are called chattels.


The definition of a chattel is tangible moveable property, these are assets that can be moved, seen, and touched.

Examples include items of household furniture, paintings, antiques, items of crockery and china, plates and silverware. Motorcars, lorries and motorcycles.

Any items of plant and machinery that are not permanently fixed to a building is a chattel.

Chattels special rules

Generally, if the proceeds received from the disposal of a chattel is under £6,000 it would be exempt from CGT, this would cover a large majority of household items and possibly smaller investment items too.

If proceeds are over £6,000 there are additional rules needed to calculate the gain, consideration needs to be made for the following:

  • Disposal of single chattel – formula driven calculation
  • If disposal forms part of a set- similar and complementary, worth more as a set
  • Business assets – not part of chattels
  • Wasting assets.

Wasting chattels

A wasting chattel is an asset with a predictable life not exceeding 50 years at the time when it was acquired TCGA92 S44(1)

Examples of wasting assets are Racehorses, fine wine, clocks, watches, trains, boats, yachts, and cars.

Wasting chattels are free from CGT.

Whisky cask investment

Whisky casks that are offered for investment when stored in oak barrels in government approved bonded warehouses are considered wasting assets.

When whisky is stored in oak barrels there is always evaporation known as ‘The Angels share’, this accounts for around 2% of the whisky cask volume a year due to the oak cask and environment the barrels are stored.

For this reason, for UK tax purposes the whisky in the casks is considered to have a life of under 50 years and therefore is exempt from UK CGT under the wasting chattel rules.

Although some bonded warehouses have conditions allowing the casks to retain some whisky longer than 50 years, this is the exception. The tax legislation defines ‘life’ as a predictable useful life ascertained at the time the asset is purchased and not on its eventual disposal.

Any gain made on a wasting chattel is exempt for CGT. So, there would be no chargeable gain in the UK, but also if the investment proved to be loss making, there would be no availability to utilise the loss against any gains made elsewhere.

An additional advantage is that whilst the whisky sits in its cask in securely bonded warehouses it is not incurring any duties.

HMRC guidance

HMRC’s view of the treatment of bottled wines and spirits was first set out in Tax Bulletin 42 published in August 1999. This guidance focusses on the availability of the chattel’s exemption, TCGA92/S262, and the wasting asset exemption, TCGA92/S45(1).

HMRC issued a guidance help sheet – Wasting assets: wines and spirits and this form the basis of the treatment used.

The other area to consider is whether HMRC would consider your investment as an investment or whether HMRC claim it as a trade. A single transaction can amount to a trading activity, but a bigger indicator would be repeated and systematic transactions.

Badges of trade

The following are the key indicators that a trade may be taking place:

  • Profit seeking motive
  • The number of transactions
  • The nature of the asset
  • Existence of similar trading transactions or interests
  • Changes to the asset
  • The way the sale was carried out
  • The source of finance
  • Interval of time between purchase and sale
  • Method of acquisition.

Existence of similar trading transactions or interests

There is an old and well quoted tax case in which HMRC did treat an investment as trade, however, this dates back to 1942 and guidance and knowledge of the sector has moved on since then.

In this case, the taxpayer was a woodcutter who bought a consignment of whisky in bond. He subsequently sold the whisky through an agent at a profit. Within the decision the judge stated:

‘The purchaser of a large quantity of a commodity like whisky, greatly in excess of what could be used by himself, his family and friends, a commodity which yields no pride of possession, which cannot be turned to account except by a process of realisation, I can scarcely consider to be other than an adventurer in a transaction in the nature of a trade… Most important of all, the actual dealings of the respondent with the whisky were exactly of the kind that takes place in ordinary trade.’

HMRC considered there was insufficient evidence to indicate an investment motive.


Using the chattels legislation to make a tax-free capital gain is a clever planning tool, but please remember although gains are not taxable, losses would not be allowable either. If your proceeds are expected to be over £6,000 on sale you will need to establish whether the investment is a wasting chattel (life expected below 50 years) in order to remain outside the scope of CGT.

Another consideration is if you plan to invest as part of Inheritance tax planning. Although free from CGT, this does not mean free from IHT and the market value of the asset will be included in your estate.

At Gerald Edelman, we have the expertise and experience to offer advice and suggestions to assist in your Inheritance tax planning as well as advising on your CGT position.

If you would like to discuss any matters in this article, please contact our tax team today.


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