According to FT, HM Revenue and Customs has released a statement warning that investment grade wine must be valued at its estimated market price for inheritance tax purposes (IHT) – not at cost price. The announcement appears to have come as a surprise to a number of wine brokers and executors who believed that cellar values were assessed and taxed based on purchase prices. With the Asian market pushing the prices of top Bordeaux to record highs, the difference between cost and current prices could mean that many executors are facing much larger tax bills than previously expected. Lafite 1982, for example, which cost around £3,200 in September 2000, was changing hands at £36,000 last month - a price increase of more than 1000% in ten years. Those who fail to file IHT returns correctly could be in line for severe penalties. The importance of an accurate and reliable valuation methodology, then, is becoming ever clearer - we believe that the Liv-ex Mid Price provides just that.
Over the past year, a number of leading wine funds have adopted the pricing mechanism, which is calculated by finding the mid point between the current highest bid price and lowest offer price on the Liv-ex trading platform. (If there has been a transaction on Liv-ex within the last 30 days and the transaction price sits within the bid-offer spread, then it is used as the Mid Price.) Liv-ex utilises proprietary data as well as general market information to give each wine a real market value – as opposed to a merchant list price or a general estimate.
Click here to view the full Liv-ex Mid Price logic.
Liv-ex also has a number of other valuation and data products available, from the quick and simple to in-depth studies. Please contact us for further details.