The top four code items:
1) No cold calls
2) No claims of guaranteed returns
3) No claims that wine investment is invariably tax free
4) Actual trading address to be used on website and company stationery rather than a serviced office/accommodation address/virtual office
The wine investment code in full:
Companies should:
Companies should:
- Not use cold calls. Companies should not canvas customers with whom they have no previous commercial relationship or where no call has been requested. (see note)
- Not send junk email offering wine investment opportunities unless this material has been requested or there is a previous commercial relationship.
- State and explain all commissions charged to the client, including any portfolio management fees. Clients should be aware that should the company they bought from cease trading then it is highly probable that they will have to pay a commission on selling their wine, irrespective of any assurances of commission-free sales made at the time of purchase.
- Advise customers on any commissions levied when they come to sell their wines and that these may change over time.
- Not to make claims of guaranteed returns.
- Advise customers that the price of wine may go down as well as up and that future trends may not mirror past ones.
- To make no claims that profits on wine investment are invariably free of either capital gains tax or inheritance tax. To advise customers that these taxes may apply on any profit made and that they should seek expert tax advice. (Note: see Inland Revenue Tax Bulletin Issue 42 Wines & spirits: the capital gains tax treatment. Also HMRC August 2010 newsletter wine valuation.) (Also see note on tax.)
- Not sell en primeurs (includes en primeur vouchers) in advance of the price being released. This does not preclude wish lists or giving an indication of estimated prices.
- Make clear to the customer the provenance and the condition of wines offered for sale. This should include any factors that might reduce the price on resale or make it difficult to sell. In particular to ensure that original wooden case (OWC) means exactly that and not a case of odd bottles, possibly of varying provenance, put together and re-packed in a spare empty case of the same wine. To declare any US stock.
- Should inform clients whether the stock is ‘duty paid’ or ‘in bond’. Wine used for investment is normally stored ‘in bond’.
- Inform customers, at the time of purchase, whether they have the wine in stock or whether they will have to source it. If the wine is not in stock, clients should be told how long they can expect to wait before they receive their wine.
- Tell clients when their wine purchase will be transferred into their account or into the company’s customer reserves.
- Explain the variety of storage options – customer reserves, own account etc. – to new customers considering wine investment. (See note)
- Make available valuation of portfolios. These valuations should be based upon the asset’s actual realisable price. (See note)
- Should advise clients, should the need arise, where they can get an independent valuation. (See note)
- Not to ‘borrow temporarily’ any wines from Customers’ Reserves without the customer’s knowledge and consent nor to later replace them with other stock without the customer’s knowledge and consent.
- To comply with the current version of the Distance-Selling-Regulations . (See note on en primeur sales.)
Websites
The following details should be on websites:
- Company name and company number.
- VAT number
- Name of managing director
- Address of registered office and trading address – not a virtual or serviced office address.
- Qualifications and experience in offering advice on wine investment.
- Any further information required by law.
Disclaimer:
Please note that this code is for guidance on wine investment with the aim of reflecting best business practice by UK wine merchants. There is no acceptance for liability any inaccuracies or omissions therein or for any typing errors. Anyone considering wine investment is urged to research the subject carefully and to do their due diligence on companies from whom they are considering buying wine.
© Jim Budd 2011
The Wine Investment Code is free to use but may not be amended or changed without permission. 
Jim,
ReplyDelete1) No cold calls
If a potential customer's phone number is not on the telephone preference scheme then what is wrong with using this means of marketing? I do understand that in general many 'dodgy' companies cold call but if it is not illegal and the company in question is reputable then there is nothing wrong whether or not it is to your taste. Every member of the public both have the ability to say 'not interested' and to, if becoming overly pestered by cold calls, sign their number up to the TPS. Also where is the line drawn as there are plenty of marketing companies that supply lists of potential customers who have at some point requested either wine based informations/promotions or investment based information/promotions.
3) No claims that wine investment is invariably tax free.
I agree that tax advice should be given by a tax accountant or lawyer but in relation to this subject there is still great uncertainty and ambiguity from HMRC. I think all covered by this topic from companies to collectors would appreciate clarity.
How many people have declared or had to declare profits on wine sales for tax purposes?
E.G.
Is a case classed as a set and as such does the £6000 threshold apply to the case value rather than the bottle value.
As for the 50 year lifespan, does it relate to the product as originally intended i.e. as a drink or as it has become an antique or investable asset? Also if it is the former, who is it who decides that the product is drinking at a quality originally intended by the producer (Chateau). I cannot see how it is valid to go on a single critics view such as Parker and would far prefer it if the Chateau in question be the ones to put a 'best before' date to their product.
Apart from these two points, your code is both admirable and poignant and I hope all aim to follow it to the letter.
Further discussion on both points 1 & 3 are appreciated.
Anon. Thanks for your comments.
ReplyDelete1. My numbers are on the Telephone Preference Scheme and I still get cold calls.Over the years since I launched investdrinks I must have received 100s if not 1000s of emails from people who were cold called and persuade to make unwise wine investments.
Amongst the firms I canvassed there was very little support for cold calling.
The code is intended to be a reflection of best practice.
3) The key word is invariably. I agree CGT is uncertain which is why I inked in the note to Anthony Rose's very useful article. I suspect that inheritance tax is a bigger threat to profits/ the value of one's wine holding on death.
Anon. Further to your comment on tax yesterday it would seem likely that HMRC would a case of the same wine eg 1959 Latour would be considered 'a set'if sold as a case.
ReplyDeleteHMRC might not go on a single critc's view, although these are the sort of people who might be called a expert witnesses if a dispute over capital gains came to court, there is plenty of evidence on the net these days as to what has recently proved drinkable and what has not.
Jim,
ReplyDeleteThank you for your response.
1. Cold Calls.
I do agree fraudulent wine investment companies cold call but I do not agree that this is a cause of the fraud and anything more than loose association. I assume that there are far more legitimate companies that cold call offering all manner of products than fraudulent ones and this direct marketing technique is chosen due to its economics.
3. Tax
If cases are classesd as sets then many investment class wines are now sold for greater than £6000 per case and as such there needs to be a very clear intepretation of HMRCs guidance. As if not many innocent wine collectors may well be committing some level of tax evasion.
I do not know whether Andrew Lloyd Webber is a UK tax payer or not, I suspect for all intensieve purposes he is and if so then what tax did he pay on his recent £3.5m sale of wine, the majority of which were lots of 6 or 12 bottle cases i.e. sets.
http://www.telegraph.co.uk/foodanddrink/wine/8275633/Andrew-Lloyd-Webbers-wine-auction-fetches-3.5m.html
This is a subject that certainly goes beyond wien investment as there are numerous collectors who perhaps int eh past were quite happy to drink their allocation of 1st Growths but now take it purely to sell for profit rather than turn down the allocation of gift horse!
Jim,
I do wonder though why the code doesn't make completely clear 'wine pricing'. There are now two very transparent publically available checks on price. Obviously the first is Wine-Searcher which can very quickly give a good indication if the wine is sensibly priced. In all walks of life a savvy consumer is one that shops around.
Secondly and perhaps more unknown is Liv-Ex which has very clear information on both list prices from their group of subscribed (& veted) merchants but also actual traded prices along with volume which gives an indication of the fluidity of the market.
In my opinion the best way to reduce the amount of wine investment fraud is for the public awareness to be steadily increased/improved. The more they know, hopefully the less bad choices they will make.
Anon. Thanks for your comments. I have covered wine-searcher and liv-ex in the notes. Following your comment have expanded this.
ReplyDeleteAnon On tax given the amount of press coverage and the growing incidence of wine investment, it surely won't be long before there is further clarification on wine and CGT.
ReplyDeleteFor the moment I would have thought it wise for anyone selling a case that exceeds the limit to treat it as a 'set'. But obviously they would want to seek expert advice.
Jim, thank you for all your hard work. I have had a few cold calls lately from CharlesWinn.com wine investors. I cant find anyone saying that they have been ripped of, but I also cant find anyone saying that they are legit... do you know anything about them?
ReplyDelete