Over recent years, many wine dealers and investment companies have peddled the idea that wine is the ultimate recession-, inflation-, tax-proof investment asset -- worth its weight in gold.
When you pass on, the story ran, HM Revenue & Customs wouldn't assess inheritance tax (IHT) on the current market value of the wine, but rather on the price it was bought at.
Theoretically, this would mean that for a vintage case of wine purchased fifty years ago for £400 but now worth £4,000, you'd only have to pay £160 rather than £1,600 in IHT.
Now, HM Revenue & Customs has issued clarification.
A spokesman said:
"When valuing the deceased's estate, find out the market value [i.e., 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."
For additional clarification, he added:
"For inheritance tax purposes, the value of any property is the price it might reasonably be expected to fetch if sold in the open market at that time."
National accountancy firm UHY Hacker Young has welcomed the clarification but warns that many wine investors could unwittingly be building up huge tax bills for their relatives and executors.
Accountant Mark Giddens said: "Tax law is pretty clear on this point but wine investments are sometimes made in a high pressure environment and good salesmen always sound plausible -- some may not even know they are giving incorrect tax advice. HMRC will be watching closely for this -- it is part of a general trend for HMRC to clamp down on IHT evasion."
He warned that executors of wills who file an incorrect IHT return could face a penalty of up to 100% of the amount of tax lost by HMRC.
As with any major investment decision, seeking professional advice is essential to ensure you fully understand all potential tax implications.