Tax man chases dead man's wine claiming not fair market value

Executors of wills are facing the prospect of paying unexpected tax bills for failing to record the market value of the wine cellars in estates.

Revenue & Customs is now warning executors that wine stored as an investment must be marked down for inheritance tax purposes at the estimated sale price at the time of its owner’s death and not at the price first paid.

The Inland Revenue believes this mis-understanding has arisen due to some misleading guidance on websites of some wine brokers.

Wine cellars do not escape the inheritance tax net if the value of a family’s estate exceeds the current IHT threshold of £325,000 for individuals and £650,000 if a spouse or civil partner has died.

Fine wines under fifty years old are exempt from CGT as the Revenue considers them a “wasting asset”. But expensive fortified wines and port, which have been around for longer, both face CGT under the Revenue’s rules depending on their price.

A 28 per cent CGT rate now applies on asset disposals taken care of by trustees.