Words by Mark Biss, founder and CEO of London Cask Traders – the London based whisky experts guiding you on your whisky investment journey.
It is of no surprise there has been a huge influx of new investors looking to capitalise on the growth of the whisky market in recent times. With inflation sitting at a staggering 6.5 per cent in the UK at the time of writing this, many investors are looking for safe, secure investments that unlike cash ISAs and other bank based investments, don’t erode the buying power of their hard earned money.
This leads investors to cask whisky, having shown great historic returns and of course being completely capital gains tax free for investors in the UK and Ireland. However, as with all new investments, there are common pitfalls investors need to be aware of in order to invest safely.
1. Buying at the right price
The main issue new investors have when investing in cask whisky is not being able to identify the real value of their casks. Unlike buying stocks or gold, there is no live market price for each cask, which has led to a lack of transparency in the market and a number of unscrupulous firms charging over the odds.
A great way to identify the real market value is to contact the distillery and see if they sell casks to the public, and if so the price they are selling them for. A lot of the time, the distillery will have their own cask offers on their website which will help you establish the true value.
2. Confirm you are the registered owner of your casks
We have heard countless horror stories of companies going bust during the pandemic and liquidating with their clients’ stock. This is why we would always advise new whisky investors to make sure they have full ownership of their casks. If you are able to contact the government bonded warehouse where they’re maturing and they can confirm ownership of your stock then you can be at peace knowing if the seller was to go bust, your casks wouldn’t go with them.
3. Ensure the seller has a WOWGR licence
To legally own Scotch whisky in government bond, you need to obtain a WOWGR (Warehousekeepers and Owners of Warehoused Goods Regulations) licence. As a whisky brokerage storing duty suspended goods, HMRC are trusting you with potentially millions of pounds in VAT and Duty for them. This means they have strict procedures in place to prevent any chance of tax loss.
Companies with WOWGR licences have typically been through a diligent six month process with HMRC officers that consist of phone and in office meetings, thorough investigation of business and director personal records and more to ensure they’re operating legitimately. This is why we’d advise only dealing with companies with a WOWGR licence.
4. Be cautious of guaranteed returns
The cask whisky market is similar to the property market. Whilst historic performance and supply and demand are factors that indicate the market is only moving upwards, one cannot guarantee whisky casks will increase in value, similar to how one cannot guarantee London property prices will increase in value. Anybody who advises otherwise are operating unscrupulously and should be avoided.
If you are looking for sound advice on cask ownership, please do not hesitate to get in touch with us on +44 (0) 20 3744 3900 or email enquiries@londoncasktraders.com. We are a fully HMRC regulated whisky brokerage with years of experience. Please feel free to read our customer reviews on TrustPilot to hear the words from our happy clients.
