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Uncorking a SIPP of fine wines for investors

Uncorking a SIPP of fine wines for investors

Wealthy investors with a liking for fine wines, art, and antiques may pick up lucrative tax breaks by ‘wrapping’ their collections in a pension scheme.

The Royal Institute of Chartered Surveyors (RICS) has introduced new guidelines for valuing art and antiques – and is urging the government to change self-invested personal pension (SIPP) rules to allow a wider spread of investments.

RICS says personal property, including wine, jewellery, homes to rent, art and antiques, were originally meant to be included in the SIPPS structure but political considerations within the Labour government omitted them at the last-minute.

The government feared criticism if SIPPs gave wealthy investors tax breaks while letting them benefit of enjoying their investments.

SIPPs act as a pension “wrapper” which lets pension holders to manage investments themselves or with the support of a manager. SIPPs are popular with business owners who pick up tax benefits by including commercial property in the wrapper.

RICS claims new valuation standards mean SIPPS could offer a wider range of investment options.

Rules relating to the valuation of arts and antiques are now included in the RIC’s Red Book – the definitive guide to valuation – and there are growing calls within the sector for all valuers to take account of these rules in order to raise standards.

Pension scheme rules are ‘anomaly’ for UK taxpayers

Residential investment property, wine, jewellery, art and antiques are already allowed under qualifying non-UK pension schemes (QNUPS), which sets a precedent for buy to let landlords in the UK.

QNUPS are a special class of pensions, along with qualifying recognised overseas pensions schemes (QROPS) that allow individuals with UK pension rights who live permanently overseas to transfer funds and assets from Britain in to an offshore pension.

RICS has pointed out that SIPP pension legislation allows a broader class of assets for investment, and that changing the rules simply means revoking HMRC exemptions that restrict categories of investment.

These pension rules seem an anomaly to British investors.

The European Union has already looked at the tax treatment of furnished holiday lets in the UK and ordered the government to standardise the rules for British taxpayers who have holiday lets in Europe.

The EU claimed British taxpayers received favourable tax treatment for properties in the UK, while those with properties in Europe were treated unfairly.

New holiday let tax rules are expected in the next Budget.

The holiday home ruling is part of a wider inquiry in to standardising pan-European tax rules for all EU citizens, as it would seem a former UK taxpayer living in Europe investing in a QNUPS would have beneficial tax breaks not available to a taxpayer with a pension in the UK.