Our answers to frequently asked questions on the Whisky industry.
Until recent years, whisky was difficult to invest in, so unlike many other investment opportunities like equities and bonds, whisky is not a ‘crowded trade’. Alongside this, choosing to invest in tangible assets gives you increased financial security – products cannot go bust in the way that organisations can - making them much more attractive as a solid investment.
An investment in Scotch Whisky is supporting British industry and business. Scotch production makes up 25% of all British food and drink exports, and the sector employs around 40,000 people in the UK. Approximately 1.2 billion bottles of Scotch whisky sell every year, and with demand currently outstripping supply and growth forecast to continue, it presents a robust long-term investment opportunity.
An investment with the Whisky Finance Company gives you a package that not only includes the Oak cask and the new-make liquid inside it but also bonded storage for 5 years to allow the whisky to mature and increase in value. Insurance is also included on the barrels to ensure your peace of mind when investing. Investing in a complete package with the WFC means that there are no storage deductions from any profit your investment generates.
You have the choice of Bourbon, Sherry and Red wine barrels which all provide unique flavours and characteristics to the whisky within.
New-make must be matured in oak barrels for a regulated minimum of 3 years in order to become Scotch Whisky. The quality restrictions surrounding Scotch Whisky production are strict to ensure you are investing in the highest quality, luxury product.
Aged for minimum 3 years but often much longer, production of Scotch Whisky requires that the distillation must occur in Scotland, that only Scottish water is added before maturation and before bottling, and that the barrels are stored in Scotland throughout the maturation process. The only additive permitted is caramel. The Scotch Whisky Regulations of 2009 mean that the unique flavour produced in Scotch production is preserved carefully and unmatched worldwide.
Whisky is unlike many stored goods in that the product develops and increases in value as it ages in casks. Investing in casks instead of bottles is more of a specialist approach, but one that is much more profitable in the long term. Unlike wine, whisky does not mature in the bottle, so once Scotch whisky is bottled there will be no change to it. The age statement on the bottle refers to the amount of time the liquid spent maturing in the cask, and the age of the whisky does not change no matter how long you keep it in the bottle. Generally, the longer that you leave the whisky in the barrel, the higher quality it will be, so older whiskies command higher prices. Therefore, investing in casks means that you invest in a product that will improve and develop over time.
Investing in barrels is a long-term investment in a product that improves significantly over time. However, this is not the only advantage of investing in cask whisky over bottles. Tax on whisky is much higher per LPA on whisky in the bottle than it is on the new spirit in the barrel. This, in addition to the absence of duty charges on the whisky during the maturation process in a bonded warehouse, makes this a very tax efficient.
An investment into the Scottish Whisky market is attractive because unlike most tangible goods, whisky stored in bonded warehouses is VAT free. As most private individuals don't register for VAT, they would be unable to reclaim the 20% paid on tangible goods, but with casked whisky, as it's in storage, they do not lose that 20% of their capital when investing.
WFC stores it's barrels in bonded warehouses, in line with the regulations for producing Scotch Whisky. Bonded warehouses are secure buildings where the whisky can be stored to mature without payment of duty.
With the whisky market thriving at record levels, there are plenty of opportunities to make a profit on your investment with WFC. Whisky is exported all around the world, and 25 bottles are exported to China every minute alone. The whisky blending industry is hugely lucrative, and there are plenty of opportunities to sell whisky after it has matured in the barrel to specialist whisky companies for blending or as a single malt.
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